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/raid1/www/Hosts/bankrupt/TCR_Public/081218.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, December 18, 2008, Vol. 12, No. 301 Headlines ACA FINANCIAL: S&P Takes Rating Actions on 3 Insured MTN Issues AGRIPROCESSORS INC: Ch. 11 Case Transferred to Dubuque, Iowa AHERN RENTALS: S&P Puts 'B+' Long-Term Rating on Negative Watch ALERITAS CAPITAL: Founder Files Bankruptcy Trying to Save Firm AMERICAN AXLE: Moody's Junks & Reviews Ratings for Further Cuts AMERICA CAPITAL: Court Okays First Amended Disclosure Statement ANTIOCH CO: U.S. Trustee Forms Five-Member Creditors Committee ASPECT SOFTWARE: Moody's Corrects December 9 Ratings Release ATLANTIC MARINE: S&P Revises Outlook on 'B+' Rating to Positive BALLY TECHNOLOGIES: Industry to Remain Under Pressure in 2009 BANC OF AMERICA: Fitch Holds Low-B Ratings on 2 Classes of Certs. BANK OF AMERICA: Fitch Holds Low-B Ratings on 4 Classes of Certs. BEAR STEARNS: Fitch Affirms Low-B Ratings on 3 Classes of Certs. BEAR STEARNS: S&P Junks Ratings on 4 Classes of Certificates BERKELEY PREMIUM: $2.75MM Sale to Pristine Bay Approved BLUE AND GREEN: Bankruptcy Case Ends; Creditors Recover 100% BOWNE & CO: S&P Cuts Credit Rating to B & Junks Debentures Rating BOYD GAMING: Fitch Says Industry to Remain Under Pressure in 2009 BRIAN TUTTLE: Court Approves Sale of Interest in Jonal Mortgage BROOKE CAPITAL: Founder Files Bankruptcy Trying to Save Firm BROOKSTONE INC: S&P Affirms B Rating & Revises Outlook to Negative CBRE REALTY: S&P Keeps Low-B Ratings on 3 Classes on WatchNegative CD 2007-CD4: S&P Lowers Ratings on Six Classes of Securities CENTURY ALUMINUM: S&P Puts 'BB-' Rating on Negative CreditWatch CHASE COMMERCIAL: Fitch Affirms Low-B Ratings on Two Classes CHASE MORTGAGE: Moody's Lowers Ratings on 2006 & 2007 Jumbo Deals CHASEFLEX TRUST: S&P Lowers Ratings on 25 Classes of Certificates CHECKSMART FINANCIAL: Moody's Confirms Junk Ratings; Outlook Neg. CHESAPEAKE CORP: Hires Hunton & Williams to Advise on Bankruptcy CHESAPEAKE CORP: S&P's Rating on 7% Senior Notes Tumbles to 'D' CHRYSLER LLC: Moody's Says Likely Scenario Is Government Support CHRYSLER LLC: To Shut for a Month; Cerberus Won't Put More Funds CIRCUIT CITY: Court OKs Hilco/Gordon as Agents for GOB Sales CIRCUIT CITY: Seeks to Keep Credit Card Deal w/ Chase Bank CITIGROUP MORTGAGE: S&P Cuts Ratings on 4 Cert. Classes to Low-B CONTINENTAL AIRLINES: Fitch Affirms Sr. Debt Rating at 'CCC/RR6' CREDIT SUISSE: Moody's Junks Ratings on 3 Classes of Certificates DEL FRISCO'S: S&P Affirms 'B' Credit Rating; Outlook Negative DELPHI CORP: Chairman Says Detroit 3 Need Pseudo-Bankruptcy DISTRIBUTED ENERGY: Wants Plan Filing Period Extended to March 2 EQUITY MEDIA: Hearing on Case Conversion to Liquidation Postponed FORD MOTOR: Moody's Says Likely Scenario Is Government Support FRONTIER AIRLINES: Court OKs Agreement With IBT Appearance Agents FRONTIER AIRLINES: IBT Pursues Appeal; Debtor Wants Stay Enforced FRONTIER AIRLINES: Reports 14.1% Drop in Workforce FRONTIER AIRLINES: CEO & James Upchurch Dispose of All Shares GENERAL GROWTH: Has Not Reached Deal With Lenders on $900MM Loan GENERAL MOTORS: E.D. Mich. Preps for Chapter 11 Filing in Detroit GENERAL MOTORS: Moody's Says Likely Scenario Is Government Support GENERAL MOTORS: Will Stop Construction of Flint Factory GOLDEN STATE FOODS: Lack of Info Cues Moody's to Withdraw Ratings HARRAH'S ENTERTAINMENT: Industry to Remain Under Pressure in 2009 HEXION SPECIALTY: S&P Keeps Ratings on Negative CreditWatch HINES HORTICULTURE: Court OKs Sale of All Assets to Black Diamond HINES HORTICULTURE: Court Approves Disclosure Statement HUNTSMAN CORP: S&P Keeps 'BB-' Credit Rating on Negative Watch ILLINOIS FINANCE: Fitch Holds 'BB-' Rating on $80.5 Million Bonds INN OF THE MOUNTAIN: S&P Junks Corp. & Debt Ratings; Outlook Neg. JAYS FOODS: Chapter 11 Dismissed Due to Lack of Funds JED OIL: Alberta Court Extends CCAA Stay Until Feb. 17, 2009 JOHNS MANVILLE: Travelers Appeal Goes to Supreme Court JP MORGAN COMMERCIAL: Fitch Holds 'C/DR5' Rating on Class J Certs. KANSAS SOUTHERN: Moody's Rates Proposed Sr. Unsec. Notes at B2 KANSAS SOUTHERN: S&P Assigns 'BB-' Rating on $190MM Senior Notes KAUPTHING BANK: Court to Hear Chapter 15 Petition on January 21 KB TOYS: U.S. Trustee Forms Seven-Member Creditors Committee LAGUNA DEVELOPMENT: Industry to Remain Under Pressure in 2009 LANDAMERICA FIN'L: Stewart Balks at Sale; Says It Has "Best" Bid LANDAMERICA FINANCIAL: Taps Zolfo Cooper's J. Mitchell as CRO LANDAMERICA FIN'L: Seeks to Remit Segregated Section 1031 Funds LANDAMERICA FINANCIAL: Investors Seek to Recover 1301 Funds LANDAMERICA FINANCIAL: Trustee Appoints Creditors Committees LAS VEGAS SANDS: Gaming Industry to Remain Under Pressure in 2009 LB-UBS COMMERCIAL: Moody's Confirms Low-B Ratings on Six Classes LEE ENTERPRISES: To Violate Covenants on $306MM of Senior Notes LEHMAN BROTHERS: Sets Derivative Deals Protocol; Creditors Object LILLIAN VERNON: Seeks April 31 Extension to File Liquidating Plan MACH GEN: Moody's Puts B2 Ratings on Review for Possible Upgrade MERRILL LYNCH: Moody's Cuts Rating on Class E $9.6MM Certs. to B2 MGM MIRAGE: Fitch Keeps Outlook on Low-B Ratings Negative MGM MIRAGE: Fitch Says Industry to Remain Under Pressure in 2009 MIDWAY GAMES: Will Lay Off 25% of Work Force & Close Texas Studio MOMENTIVE PERFORMANCE: S&P Cuts Corp. Credit Rating to 'B-' MOMENTUM PROPERTIES: Case Summary & 20 Largest Unsecured Creditors MORGAN STANLEY: Moody's Junks Ratings on 3 Classes of Certificates NEFF CORP: S&P Lowers Corp. Credit Ratings to Selective Default NES RENTALS: S&P Holds 'B+' Rating & Revises Outlook to Negative NEWPORT WAVES: Moody's Downgrades Ratings on 29 Classes of Notes NORTEL NETWORKS: Moody's Junks Rating on Series 2001-1 Certs. OFFICE DEPOT: Moody's Downgrades CFR to Ba3; Outlook Negative OLIN CORP: S&P Assigns Preliminary Low-B Ratings on Debts PARK-OHIO INDUSTRIES: S&P Holds B+ Long-Term Rating; Outlook Neg. PERKINS & MARIE: S&P Junks Corp. Credit Rating; Outlook Negative PIERRE FOODS: Consummates Ch. 11 Plan, Exits Bankruptcy PIERRE FOODS: W. Toler to Lead Firm as CEO Post-Emergence PFAU PFAU: Case Summary & 11 Largest Unsecured Creditors POLYONE CORP: S&P Cuts Corp. Credit Rating to 'B'; Outlook Stable POTLATCH CORP: Fitch Affirms IDR and Revenue Bonds Rating at 'BB+' PRESERVE LLC: May Borrow Up to $2,000,000 from Scott Krentel PUEBLO OF SANTA ANA: Industry to Remain Under Pressure in 2009 QUEBECOR WORLD: Four Directors Step Down from Board REAL ESTATE ASSET: Moody's Affirms Low-B Ratings on Six Classes ROBERT ORR: Files for Bankruptcy to Keep Brooke & Aleritas Afloat ROBERT ORR: Case Summary & 18 Largest Unsecured Creditors ROCKET RESTAURANT: Files for Chapter 11 Protection in Colorado SASI FINANCE: Moody's Corrects December 8 Ratings Release SEMGROUP LP: Catsimatidis to Meet Senior Mgt. Monday SEMGROUP LP: Court Extends Plan Filing Deadline to March 19 SEMGROUP LP: Ex-CEO of Energy Unit & Other Parties Oppose Probe SEMGROUP LP: Examiner Seeks to Retain Morrison as Counsel SEMGROUP LP: Holdings' Schedules Of Assets And Liabilities SEMGROUP LP: Energy Unit's Forbearance Agreement Expires Today SMITHFIELD FOODS: S&P Cuts Corporate Credit Rating to 'B' SOLUTIA INC: Supports $14BB Bailout for U.S. Automakers SOLUTIA INC: Court OKs Trumbull Termination, Allows DuPont Claim SOLUTIA INC: Accounts for $440MM of $2.9BB PIPE Deals in 2008 SPECTRUM BRANDS: Fitch Affirms & Withdraws Ratings STATION CASINOS: Gaming Industry to Remain Under Pressure in 2009 STILLWATER MINING: Moody's Junks CFR; Outlook Remains Positive STONERIDGE INC: Moody's Puts Low-B Ratings on Review for Downgrade SUNSTATE EQUIPMENT: S&P Affirms 'B+' Rating; Outlook Negative TENET HEALTHCARE: Board OKs Amendments and Restatement of Bylaws TENET HEALTHCARE: CEO, Other Execs Disclose Ownership of Stock THE GAP: Fitch Affirms & Withdraws Low-B Ratings THORNBURG MORTGAGE: S&P Lifts Counterparty Credit Rating to 'CC' TREMONT GROUP: More Than Half of Assets Invested in Madoff's Firm TRIBUNE CO: Teamsters Says Employees Should Be First in Line TRIMAS CORP: Moody's Affirms B2 CFR & Junks Sr. Sub. Notes Rating TRONOX INC: Taps Kirkland & Ellis for Bankruptcy Advice TRUMP ENTERTAINMENT: Industry to Remain Under Pressure in 2009 VICORP RESTAURANTS: To Sell Most of Assets for $59 Million VICORP RESTAURANTS: To File Stalking Horse Agreement on Dec. 17 WACHOVIA BANK: S&P Lowers Ratings on Classes N & O Certificates WELLS FARGO: Moody's Downgrades Jumbo Deals Issued in 2006 & 2007 X-RITE INC: CFO Discloses Ownership of 38,000 Equity Interest X-RITE INC: Appoints Bradley J. Freiburger as Interim CFO YELLOWSTONE MOUNTAIN: U.S. Trustee Forms 9-Member Creditors Panel YELLOWSTONE MOUNTAIN: Can Access $19.75 Mil. CrossHarbor Facility * Fitch: U.S. Gaming Industry Will Remain Under Pressure in 2009 * Moody's Cuts Ratings on 348 Notes Issued by 166 SF CDOs in 2006 * Moody's: Likely Scenario for Big 3 Is Major Government Support * S&P Corrects Ratings Release to Show Right Debt Type for Venoco * S&P Cuts Ratings on 19 Classes of Certificates From 6 RMBS Deals * S&P Lowers Ratings on 99 Classes From 7 U.S. RMBS Transactions * S&P Junks Two Classes of EURO-Denominated Notes * S&P Lowers Ratings on 18 Classes From 6 U.S. RMBS Transactions * S&P Lowers Ratings on 34 Classes From 5 RMBS Transactions * Chapter 11 Cases With Assets & Liabilities Below $1,000,000 ********* ACA FINANCIAL: S&P Takes Rating Actions on 3 Insured MTN Issues --------------------------------------------------------------- Standard & Poor's Ratings Services took these rating actions on three bond-insured medium-term note (MTN) issues: -- "We raised our ratings on all three bond-insured MTN issues; -- "We removed the ratings from CreditWatch with developing implications, where they were placed Nov. 25, 2008; and -- "We removed our ratings on all three bond-insured MTN issues. S&P said, "These rating actions follow the Dec. 15, 2008, placement of our financial strength, financial enhancement, and issuer credit ratings on ACA Financial Guaranty Corp. to 'B' from 'CCC' and our removal of those ratings from CreditWatch developing, where they were placed Dec. 19, 2007. We then withdrew the ratings at the company's request." RATINGS RAISED AND REMOVED FROM CREDITWATCH DEVELOPING * ACA Financial Guaranty Corp.-Supported MTN Issues Aegis Texas Venture Fund L.P. US$22.535 mil medium-term notes series 2005 due 08/01/2011 Rating To From -- ---- B CCC/Watch Dev Whitecap Alabama Growth Fund I LLC US$14.620 mil medium-term notes series 2004 due 03/01/2014 Rating To From -- ---- B CCC/Watch Dev Whitecap Louisiana Growth Fund LLC US$6.8 mil medium-term notes series 2003 due 03/01/2013 Rating To From -- ---- B CCC/Watch Dev RATINGS WITHDRAWN * ACA Financial Guaranty Corp.-Supported MTN Issues Aegis Texas Venture Fund L.P. US$22.535 mil medium-term notes series 2005 due 08/01/2011 Rating To From -- ---- NR B Whitecap Alabama Growth Fund I LLC US$14.620 mil medium-term notes series 2004 due 03/01/2014 Rating To From -- ---- NR B Whitecap Louisiana Growth Fund LLC US$6.8 mil medium-term notes series 2003 due 03/01/2013 Rating To From -- ---- NR B NR -- Not rated AGRIPROCESSORS INC: Ch. 11 Case Transferred to Dubuque, Iowa ------------------------------------------------------------ The U.S. Bankruptcy Court, Eastern District of New York (Brooklyn) has granted the transfer of the venue of Agriprocessors Inc.'s Chapter 11 cases to the U.S. Bankruptcy Court in Dubuque, Iowa. Agriprocessors is based in Postville, Iowa. According to Bloomberg News' Bill Rochelle, the Brooklyn bankruptcy judge also approved an increase in the secured funding from $2.5 million to $3.4 million. The loan is provided by First Bank Business Capital Inc., the secured lender owed $33.5 million. The bank also filed the motion to change venue. Meanwhile, Bankruptcy Law360 reports that Florida-based Quantum Partners Inc. filed a letter of intent Friday in the U.S. Bankruptcy Court for the Eastern District of New York to provide up to $50 million in loans to Agriprocessors Inc. in exchange for taking on a controlling share in the family-owned business. The Brooklyn Bankruptcy Court previously approved the United States Trustee for Region 2's request to appoint a Chapter 11 Trustee for the Chapter 11 case of Agriprocessors Inc. The secured lender was unwilling to provide financing to the company without a trustee or a third party in control, Mr. Rochelle reported. The Chapter 11 Trustee took control of the company away from the Rubashkin family. CEO Sholom Rubashkin was arrested for defrauding the lender by diverting collateral and inflating accounts receivables. About Agriprocessors Headquartered in Postville, Iowa, Agriprocessors Inc. -- http://www.agriprocessor.com/-- operates a kosher meat and poultry packing processors located at 220 North West Street. The company maintains an executive office with 50 employees at 5600 First Avenue in Brooklyn, New York. The company filed for Chapter 11 protection on Nov. 4, 2008 (Bankr. E. D. N.Y. Case No. 08-47472). Kevin J. Nash, Esq., at Finkel Goldstein Rosenbloom & Nash represents the company in its restructuring effort. The company listed assets of $100 million to $500 million and debts of $50 million to $100 million. AHERN RENTALS: S&P Puts 'B+' Long-Term Rating on Negative Watch --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Ahern Rentals Inc. on CreditWatch with negative implications, including the 'B+' long-term corporate credit and senior secured debt ratings. "The CreditWatch stems from expected weakening conditions in nonresidential construction markets and Ahern's constrained liquidity entering a downturn," said Standard & Poor's credit analyst John Sico. "Ahern has not reduced capital spending to the level that would be anticipated in weakening markets, limiting any positive free cash flow, and liquidity has suffered as a result of the company's still-high capital spending. Although the company is currently in compliance with financial covenants, a step down in leverage could become an issue if Ahern fails to maintain minimum liquidity of $25 million. The company is leveraged with debt to EBITDA at about 4.1x as of Sept. 30, 2008 (adjusted for operating leases). For the existing rating, we expect debt to EBITDA to average 3.5x-4x." "We could lower the rating on the company in the near term if credit metrics continue to weaken and liquidity and headroom on covenants deteriorates. Ahern's operating performance could weaken in 2009 due to the difficulties facing the industry and result in metrics considerably outside our range of expectations. As we expect industry conditions to turn down, Ahern needs to cut back on capital expenditures to generate free cash flow. We could lower the rating if free cash flow is not achieved to reduce debt and provide adequate headroom on covenants." ALERITAS CAPITAL: Founder Files Bankruptcy Trying to Save Firm -------------------------------------------------------------- Robert Orr filed for personal bankruptcy after pledging his family fortune trying to save Brooke Capital Corporation, an insurance agency franchisor and a public company, and Aleritas Capital Corp., a finance company specializing in insurance lending and a public company of which Orr's family indirectly owned approximately 29%. Aleritas loaned money to insurance agencies, then packaged the loans as securities and sold them to Wall Street investors. To enhance the credit quality of these securities, Brooke Capital provided franchising and consulting services to insurance agency borrowers on behalf of the Wall Street investors. The refusal of Wall Street investors to pay servicing fees for the consulting and collateral preservation services provided by Brooke Capital caused the insurance agency franchisor to collapse from cash flow shortages and the finance company to collapse from deterioration of loan quality because the insurance agency franchisor could no longer afford to provide these critical services to the finance company's borrowers. The meltdown of these companies accelerated when a special master, who was appointed by the court to maintain the status quo until Brooke Capital's differences with Wall Street investors were resolved, instead liquidated assets and released insurance agency franchisees from their agreements. With Brooke Capital in bankruptcy and Aleritas in liquidation, it is unlikely Orr will see repayment of approximately $12,000,000 that his family loaned to the companies in recent months. Another result of the companies' collapse is that Orr will be required to repay approximately $25,000,000 of debt that was personally guaranteed by him as part of Orr's efforts in recent months to turn around the companies. "Last year I retired as a company executive, but I came out of retirement in April of this year to help Aleritas, and later Brooke Capital, through difficult economic times," Mr. Orr said. "With the benefit of hindsight, I regret returning as a company executive because the price paid by my family has been extraordinary. I have endured financial ruin and unwarranted personal attacks," he said "As an executive taking over management of these troubled companies just prior to their collapse and as an executive responsible for making the difficult decisions required to turnaround these troubled companies, I have become the target of attack for anyone with a complaint," Mr. Orr continued. Last year, as a result of merging wholly owned Brooke Capital and wholly owned Aleritas into existing public companies, most of the stock of Aleritas and Brooke Capital became directly, or indirectly, owned by public investors. "When Aleritas and Brooke Capital became public companies last year, I believed that I could slow down after a lifetime of 60-70 hour weeks," Mr. Orr related. "I believed that my involvement as an executive was not required because, as an investor in public companies, my investment would be protected by the management accountability demanded by independent directors, exchange listing provisions, sophisticated investors and auditors," Mr. Orr added. After Aleritas became a public company, Orr did not serve as a director or officer. After Brooke Capital became a public company, Orr remained as a director but relinquished all executive responsibilities. Mr. Orr said, "In March of this year it became apparent that I was naive to rely on public company safeguards to protect my investment in Aleritas." Aleritas had become financially troubled primarily as a result of increased loan losses, a failed refinancing transaction and rapid expansion in a difficult economy. In response to a request from Aleritas' largest purchaser of loan participations, Orr asked for an emergency meeting of the Aleritas board on March 31, 2008 to demand the changes required for a turnaround of the company, including the appointment of Orr as interim chief executive officer of Aleritas until the company found a capable replacement with turnaround experience. Over the next several weeks, Mr. Orr announced to investors: a) a $24 million charge for loan losses and credit impairments, b) suspension of the company's growth plans; and c) the proposed steps to complete the failed refinancing transaction. During the five months that Mr. Orr and Michael Hess were Aleritas executives, many unpopular and difficult decisions were implemented which they believed were required to turn the company around, including: a) working with Brooke Capital to mitigate loan losses despite previous tensions between Aleritas and Brooke Capital; b) negotiating with recalcitrant Wall Street investors for payment of servicing fees to assure Brooke Capital's continued assistance; c) negotiating with lenders to remedy liquidity concerns; and d) reducing the amounts of collateral pledge and loan payment discrepancies existing on March 31st when Orr and Hess became Aleritas executives. Especially difficult were the decisions made to reduce collateral pledge and loan payment discrepancies because this involved decisions regarding payment priorities and collateral quality. Mr. Orr and Hess first required the completion of conversion to a new loan accounting process to better track and control collateral pledges and loan payments. Although discrepancies were significantly reduced after March 31st, the resolution of those discrepancies existing on March 31st sometimes evolved into different discrepancies as Orr and Hess tried to fairly resolve these issues. Brooke Capital has historically provided critical assistance to franchise agency borrowers as part of a servicing agreement with Wall Street investors. During August Brooke Capital experienced significant cash flow problems because Wall Street investors refused to pay past due servicing fees owed to Brooke Capital. Apparently frustrated that they could not collect past due servicing fees and resolve the company's cash flow problems, Brooke Capital's chief executive officer, chief operating officer, senior vice president and general counsel resigned. Mr. Orr reluctantly stepped in on August 19th to fill the management void in Brooke Capital and aggressively pursued collection of past due servicing fees during the ensuring month that he served as Brooke Capital's chief executive officer. Allegations of funds misappropriation leveled against Orr by WallStreet investors were primarily the result of Brooke Capital offsetting the past due amounts it was owed from Wall Street investors by the amounts that Brooke Capital owed to Wall Street investors. These offsets were approved by Brooke Capital's legal counsel and summarized in a court motion. The dispute between Wall Street investors and Brooke Capital culminated in the appointment of a special master on Sept. 17, 2008, and the resulting collapses of Aleritas and Brooke Capital. Mr. Orr summarized by saying, "Until the meltdown caused by Wall Street investors, I was confident that Aleritas and Brooke Capital were taking the difficult steps required to turn around the companies. As a result, my family did not sell any stock -- until it was seized by the creditors for repayment of a company loan -- and instead purchased approximately $2,000,000 in additional stock during 2008. I believed in Aleritas and Brooke Capital." About Aleritas Capital Aleritas Capital Corporation fka Brooke Credit Corporation lends primarily to locally-owned businesses that sell insurance. The firm's market consists of retail insurance agencies and managing general agencies, where the sale of insurance is their primary business. In addition, it loans money to funeral home owners, where the sale of insurance is often an important, although not primary, part of their business. It focused on lending to small 'main street businesses' across America, primarily in insurance- related industries which have historically been underserved by traditional lenders. AMERICAN AXLE: Moody's Junks & Reviews Ratings for Further Cuts --------------------------------------------------------------- Moody's Investors Service lowered American Axle & Manufacturing Holdings, Inc.'s Corporate Family Rating and Probability of Default Rating to Caa1 from B2 and is reviewing the rating for further possible downgrade. In a related action Moody's affirmed the ratings on the company's bank credit facilities at B2, lowered the rating on the unsecured guaranteed notes to Caa2 from B2, and lowered the ratings on the unsecured convertible notes to Caa2 from B2. The Speculative Grade Liquidity Rating was lowered to SGL-4 from SGL-3. The lowering of American Axle's Corporate Family Rating to Caa1 incorporates sustained lower North American production levels at the Detroit-3 automobile manufacturers, recently announced production declines, and the likelihood of further production declines going into 2009. The action also considers American Axle's large customer concentrations with General Motors, and the potential for financial restructurings or bankruptcy filings by one or more of the Detroit-3 OEMs which could create further operating disruptions for American Axle. The review will continue to assess the expected deterioration in the North American market for SUVs and light trucks, the resulting pressure on the company's credit metrics, and the eroded financial condition of the North American operations of the Detroit-3. American Axle realized important structural cost benefits from the constructive labor contact that was completed in May 2008, and from other restructuring actions. The company has announced $1.4 billion of new business wins that are expected to further diversify the company's customer base, products and geographic mix. Moody's will evaluate the degree to which these and any further actions may mitigate the severe downturn in the North American automotive markets, which is expected to continue into 2009. The review will also assess the level of liquidity that American Axle will likely be able to maintain during this downturn. The ratings of the bank credit facilities, the unsecured notes and the convertible notes reflect their priority in Moody's LGD Methodology. In November 2008, the company amended its bank credit facilities which, among other things, provided security to the lenders in exchange for certain financial covenant and other amendments; and extended a portion of the reduced commitments to December 2011 in exchange for additional pricing. The new commitment level of $477 million is available until April 2010 and $369 million of this commitment is available until December 2011. As a result, the amended bank facility is notched above the Corporate Family Rating and the unsecured notes are notched below. The Speculative Grade Liquidity Rating of SGL-4 reflects the expectation that the company's ability to generate positive free cash flow over the next twelve months will be pressured by the announcement of reduced production levels in North America from the company's largest customer. At September 30, 2008, the company reported $454 million of cash. An additional $117 million of cash is reclassified as short-term investments in the Reserve Funds. Redemptions from the Reserve Funds were temporarily suspended in September of 2008. The company maintained availability of $105 million under the revolving credit facility at the prior $600 million commitment level. Availability is now reduced under the amended $477 million commitment level. Principal financial covenants under the amended facilities include a secured debt/EBITDA test and an EBITDA/interest expense test. Covenants continue to exclude special and non-recurring items such as the costs related to restructuring under the new labor agreement. While the new covenant levels provide additional cushion, continuing announced production declines in North America will continue to pressure these cushion levels. The security provided to the lenders as part of the bank credit facility amendment limit the company's alternate sources of liquidity, subject to lien baskets and sale/leaseback limitations in the respective indentures. Ratings lowered and under review: American Axle & Manufacturing Holdings, Inc. * Corporate Family, to Caa1 from B2 * Probability of Default, to Caa1 from B2 * Unsecured guaranteed convertible note, to Caa2 (LGD5, 78%) from B2 (LGD4, 54 %) American Axle & Manufacturing, Inc. * Unsecured guaranteed notes, to Caa2 (LGD5, 78%) from B2 (LGD4, 54 %); * Speculative Grade Liquidity Rating, to SGL-4 from SGL-3 Ratings affirmed: * Secured guaranteed term loan, B2 (LGD2, 26%) Holdings' obligations are guaranteed by American Axle and vice versa. The last rating action was on October 20, 2008, when American Axle's ratings were placed under review. American Axle & Manufacturing, Inc., headquartered in Detroit, MI, is a world leader in the manufacture, design, engineering and validation of driveline systems and related components and modules, chassis systems, and metal formed products for light truck, SUV's and passenger cars. The company has manufacturing locations in the USA, Mexico, the United Kingdom, Brazil, China and Poland. The company reported revenues of $3.2 billion in 2007. AMERICA CAPITAL: Court Okays First Amended Disclosure Statement --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Florida approved on Dec. 9, 2008, the disclosure statement filed by America Capital Corp. in support of its First Amended Plan of Liquidation. The Court has set Jan. 19, 2009, as the last day for filing and serving objections to confirmation of the Plan. A hearing to consider confirmation of the Plan is set for Jan. 28, 2009. As reported in the Troubled Company Reporter on Dec. 2, 2008, America Capital Corp. delivered to the U.S. Bankruptcy Court for the Southern District of Florida on Nov. 18, 2008, its First Amended Plan of Liquidation and First Amended Disclosure Statement. The Debtor related that holders of allowed claims would receive higher recovery under the terms of the Plan than in a liquidation under Chapter 7 of the Bankruptcy Code. Plan Funding America Capital's Amended Plan incorporates the plan of Transcapital Financial Corporation. American Capital has a 65.19% ownership interest in TFC, which in turn owns 100% of the common stock of Trasohio Savings Bank. The Plan will be funded entirely by the TFC distribution and recoveries, if any, in respect to certain litigation claims against third parties. Classifications and Distributions Under the Plan The classifications and distributions under the Plan are: Class Type of Claim Treatment ----- ------------- --------- 1 Allowed Other Priority Claims Unimpaired 2 Allowed Secured Claim of Impaired SunTrust with regard to the AMCAP Notes Claim, which is based upon amounts owed under the AMCAP Notes Judgment, the the AMCAP Notes and the Indenture 3 Allowed Unsecured Claims for Unimpaired Senior Indebtedness 4 Allowed Unsecured Claims Impaired 5 Allowed Equity Interests Impaired Allowed Administrative Claims, Priority Tax Claims, and U.S. Trustee Fees will be paid in full. Professional Fees and Expense Claims, as allowed by the Court, will be paid in full on the Effective Date. Each holder of an Allowed Other Priority Claim under Class 1 will be paid in full. In full and complete satisfaction of any Class 2 Allowed Secured Claim held by SunTrust with regard to the AMCAP Notes, SunTrust will receive the Net TFC Distribution and the Net Proceeds of any Litigation Claims, other than Avoidance Actions (after the Liquidating Agent first funds the Senior Indebtedness Distribution, to the extent applicable). To the extent that it may exist, any Deficiency Claim SunTrust may have with regard to the AMCAP Notes Claim will be treated as a Class 4 Allowed Unsecured Claim, but will not share in the Unsecured Carve-Out. If the Court determines by final order that the Class 2 or Class 4 AMCAP Notes Claim is subordinate to the Allowed Unsecured Claims for Senior Indebtedness under Class 3, if any, each Holder of an Allowed Class 3 Claim will be entitled to receive its allocated share of the Senior Indebtedness Reserve in full satisfaction of its Allowed Claim. Otherwise such Claims will be treated as Class 4 Claims. Each Holder of an Allowed Class 4 Claim will be entitled to receive such Holder's Pro Rata Share of (i) the Net TFC Distribution following full and complete satisfaction of Allowed Administrative Claims, Allowed Priority Tax Claims, and Allowed Class 1 and 2 Claims (and in the case of SunTrust only, the net amount after deducting the Senior Indebtedness Distribution from the Pro Rata Share of the Net Distribution which Suntrust would otherwise be entitled to receive; (ii) to the extent SunTrust does have an Allowed Secured Claim, the Unsecured Carve-Out; provided however that the SunTrust Deficiency Claim will not receive a distribution from the Unsecured Carve-Out. Holders of Allowed Equity Interests under Class 5 will not retain or receive any property or Distribution under the Plan and all Equity Interests will be cancelled and extinguished as of the Effective Date. Classes 2 and 4 are impaired and entitled to vote. Equity interests are deemed to reject. Except as otherwise provided in the Plan, the Liquidating Agent will act as disbursing agent under the Plan with respect to all Distributions to holders of Claims and will make all Distributions required to be distributed under the applicable provisions of the Plan, provided however that the Debtor will make the Initial Distribution under the Plan. After the Effective Date, the Liquidating Agent will have the sole authority to compromise and settle, otherwise resolve, discontinue, abandon or dismiss all such Litigation Claims with approval of the Court. A full-text copy of America Capital Corp.'s First Amended Plan of Liquidation is available for free at: http://researcharchives.com/t/s?357e A full-text copy of the First Amended Disclosure Statement for America Capital Corp.'s First Amended Plan of Liquidation is available for free at: http://researcharchives.com/t/s?357f About America Capital Corp. Based in Miami, Florida, America Capital Corp. holds a 65.19% interest in TransCapital Financial Corporation. TransCapital Financial is a holding and management company that conducted substantially all of its operations through its wholly owned subsidiary, Transohio Savings Bank, FSB. Transohio Savings' key activities as a savings and loans institution were banking and lending and its primary lending activity was the originating and purchasing of loans secured by mortgages on residential properties. Transohio Savings also endeavored to generate residential loan originations through branch personnel and real estate brokers. Mobile home and home improvement loans were generated through dealers and contractors and additionally, Transohio Savings made construction loans generated by contractors that usually extended to not more than one year in length. America Capital filed for chapter 11 relief on June 19, 2006 (Bankr. S.D. Fla. Case No. 06-12645). Cynthia C. Jackson, Esq., at Smith Hulsey & Busey, Jeffrey I. Snyder, Esq., Mindy A. Mora, Esq., and Nicole Testa Mehdipour, Esq., at Bilzin Sumberg, represents the Debtor as counsel. When the Debtor filed for protection from its creditors, it listed total assets of $52,005,000 and total debts of $207,170,268. TransCapital Financial Corporation also filed for Chapter 11 relief on June 19, 2006 (Bankr. S.D. Fla. Case No, 06-12644). Its Chapter 11 Plan was confirmed on Sept. 23, 2008. ANTIOCH CO: U.S. Trustee Forms Five-Member Creditors Committee -------------------------------------------------------------- The United States Trustee for Region 9 appointed seven creditors to serve on an Official Committee of Unsecured Creditors for KB Toys Inc. and its debtor-affiliates. The creditors committee members are: 1) Lisa Marie Drew 8849 Ridgewood St. Joseph, MN 56374 2) Heide Leigh Everett 8553 Orange Road St. Joseph, MN 56374 3) 2377 Commerce Boulevard, LLC Attn: Gary Gottschlich Gottschlich & Portune, LLP 201 E. Sixth St. Dayton, OH 45402 4) Kay Richter 26352 Huckleberry Court Cold Spring MN 56320 5) Walthall A&B, LP Attn: Jenny J. Hyun, Esq. c/o Weingarten Realty 2600 Citadel Plaza Dr., Suite 300 Houston, TX 77008 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtor's expense. They may investigate the Debtor's business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual Chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtor is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. About Antioch The Antioch Co. -- http://www.antiochcompany.com/-- which owns St. Cloud-based Creative Memories. The company was founded in 1926. It consists of operating and business units located in Ohio, Minnesota, Nevada, and Virginia. The direct-selling division encompasses the U.S. and Puerto Rico, Canada, Australia, New Zealand, Germany, Japan and the United Kingdom, with expansion planned in other European countries. The Antioch employs more than 1,090 people and manufactures, packages and markets more than 3,000 products to tens of thousands of independent sales Consultants and retail dealers. As reported in the Troubled Company Reporter on Nov. 17, 2008, The Antioch Co. reached an agreement with its lenders to restructure its debt. To facilitate this agreement, Antioch and six of its subsidiaries filed voluntary petitions for Chapter 11 protection with the U.S. Bankruptcy Court for the Southern District of Ohio. In their summary of schedules, the Debtors listed $66,388,321 in total assets and $141,142,236 in total liabilities. ASPECT SOFTWARE: Moody's Corrects December 9 Ratings Release ------------------------------------------------------------ Moody's Investors Service said that historic ratings for Aspect Software Inc.'s loan facilities appeared incorrectly in the December 9, 2008 press release. The existing ratings for the senior secured revolving facility and the first lien term loan should have been listed as Ba3, LGD3, 32% and the second lien term loan should have been listed as Caa1, LGD5, 85%. The revised release states: Moody's Investors Service placed Aspect Software Inc.'s ('Aspect') ratings under review for possible downgrade. The rating action was driven by the company's declining operating performance and the likely challenges the company will have in meeting financial loan covenants. The review will focus on the company's revenue, profitability and free cash flow prospects for 2009 and beyond as well as the company's prospects for meeting loan covenants. These ratings have been placed under review: * Corporate family rating, B2 * Probability of Default, B2 * $50 million senior secured revolving facility due 2010 -- Ba3, LGD3, 32% * $725 (original amount) million first lien term loan due 2011 -- Ba3, LGD3, 32% * $385 million second lien term loan due 2012 -- Caa1, LGD5, 85% The recent decline in performance is primarily driven by declines in new product sales which were largely driven by cutbacks and delays in corporate spending. The company continues to be a leader in call center software communications systems and their products continue to receive strong reviews from independent industry analysts. Maintenance revenues have held up well year to date and are likely to continue to hold up in 2009. Despite difficulties in top line performance, Aspect continues to produce strong levels of free cash flow (8.5% free cash flow-to-debt for the LTM period ended Q3'08) Free cash flow will likely decline in 2009 however as Aspect's customer base reins in spending. Moody's most recent rating action was in May 2006 when Moody's changed the ratings outlook to negative reflecting the additional debt the company took on to fund a special dividend payment. Aspect's ratings were assigned by evaluating factors Moody's believes are relevant to the credit profile of the issuer, such as i) the business risk and competitive position of the company versus others within its industry, ii) the capital structure and financial risk of the company, iii) the projected performance of the company over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of Aspect's core industry and Aspect's ratings are believed to be comparable to those of other issuers of similar credit risk. Aspect Software Inc. is headquartered in Chelmsford, Massachusetts. The company develops, markets, licenses and supports an integrated suite of contact center software applications. ATLANTIC MARINE: S&P Revises Outlook on 'B+' Rating to Positive --------------------------------------------------------------- Standard & Poor's Ratings Services has revised the outlook on Atlantic Marine Holding Co. to positive from stable and affirmed the ratings, including the 'B+' corporate credit rating. "At the same time, we also affirmed our 'BB-' bank loan rating on the company's $230 million secured credit facility, which is being amended to permit certain proposed acquisitions. The '2' recovery rating on the facility is unchanged," S&P said. "The outlook revision reflects expectations of improving credit protection measures in 2009 resulting from the proposed acquisitions, as well as higher revenues and earnings at the existing operations," said Standard & Poor's credit analyst Christopher DeNicolo. Jacksonville, Fla.-based Atlantic Marine provides maintenance, repair, overhaul, and conversion (MROC) services for military and commercial vessels, and manufactures and assembles ships, ship modules, and subsections for ship owners and other shipyards." Atlantic Marine plans to acquire two small vessel repair companies, Millennium Industrial and Marine Solutions Inc. and Boston Ship Acquisition LLC (both unrated), for a total cost of $31.5 million, including fees and expenses. The purchase agreements also include future earnout payments through 2012 if certain profitability targets are met, which could total $12.25 million for Millennium and $15 million for Boston Ship. The acquisitions will be financed largely with equity from Atlantic Marine's owner, J.F. Lehman & Co. The two additions, which are expected to contribute $35 million to $45 million of revenue in 2009, will increase the company's presence in the offshore and government market segments, and expand its geographic reach to the Northeast by providing facilities in Boston and Philadelphia. The transaction is expected to close by the end of the year. The ratings on Atlantic Marine reflect weak, but improving, credit protection measures; a small revenue base (about $300 million pro forma for the proposed acquisitions), especially compared with that of some competitors in the government sector; and growth that is dependent on the more competitive and cyclical nonmilitary and marine fabrication segments. These factors are partly offset by high barriers to entry in the marine repair industry and the fairly good diversity of the vessels the company services. Atlantic Marine currently operates out of three locations: Mobile, Ala. (about 47% of revenues), on the Gulf Coast; Jacksonville, Fla. (43%), on the Atlantic; and Naval Station Mayport near Jacksonville (10%), which exclusively services the U.S. Navy. The company is able to service ships up to almost 1,000 feet in length, including large cruise ships. S&P said, "We expect moderate revenue growth in the intermediate term largely caused by solid growth in the marine fabrication business. Sales in both the government and commercial segments can be uneven as large vessels are serviced. Revenues and earnings in 2008 will be below our initial expectations because of delays on a marine fabrication contract resulting from the customer's not providing engineering information on schedule. Operating margins (before depreciation) are good, at about 20%, but are likely to decline slightly in 2009 because of lower margins at some of the acquired operations and a higher proportion of less-profitable marine fabrication work. The company does not publicly release financial data." "Liquidity is likely to be adequate for near-term financial and operational needs. We expect the company to generate modest free cash flow and have more than $20 million available for borrowings under the $45 million revolving credit facility after letter-of- credit usage. We also expect capital expenditures to remain high, but manageable, to make improvements to facilities. "The outlook is positive. Steady demand in key markets, contributions from acquisitions, and satisfactory profitability should result in good revenue and earnings growth and allow for some debt reduction, thereby improving credit protection measures. We could raise the ratings if this results in debt to EBITDA dropping below 2.5x and funds from operations to debt rising above 25% on a sustained basis. We could revise the outlook back to stable if demand or profitability in growth areas, especially marine fabrication, falls significantly below our expectations or if leverage increases materially (debt to EBITDA above 3.5x) to fund acquisitions or further dividends." BALLY TECHNOLOGIES: Industry to Remain Under Pressure in 2009 ------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) BANC OF AMERICA: Fitch Holds Low-B Ratings on 2 Classes of Certs. ----------------------------------------------------------------- Fitch Ratings has affirmed and assigned Ratings Outlooks to Banc of America Securities LLC's (BACM) commercial mortgage pass- through certificates, series 2003-1: -- $210.8 million class A-1 at 'AAA'; Outlook Stable; -- $506.2 million class A-2 at 'AAA'; Outlook Stable; -- Interest-only class XC at 'AAA'; Outlook Stable; -- Interest-only class XP-1 at 'AAA'; Outlook Stable; -- Interest-only class XP-2 at 'AAA'; Outlook Stable; -- $34.9 million class B at 'AAA'; Outlook Stable; -- $12.9 million class C at 'AAA'; Outlook Stable; -- $24.5 million class D at 'AAA'; Outlook Stable; -- $11.6 million class E at 'AAA'; Outlook Stable; -- $11.6 million class F at 'AAA'; Outlook Stable; -- $11.6 million class G at 'AAA'; Outlook Stable; -- $10.3 million class H to 'AA+'; Outlook Stable; -- $21.9 million class J to 'A'; Outlook Stable; -- $7.7 million class K at 'BBB+'; Outlook Stable; -- $6.5 million class L at 'BBB'; Outlook Stable; -- $6.5 million class M at 'BBB-'; Outlook Stable; -- $5.2 million class N at 'BB'; Outlook Stable; -- $3.9 million class O at 'B+'; Outlook Stable; -- $1.2 million class SB-A at 'AAA'; Outlook Stable; -- $4.5 million class SB-B at 'AAA'; Outlook Stable; -- $10.3 million class SB-C at 'AAA'; Outlook Stable; -- $3.1 million class SB-D at 'AAA'; Outlook Stable; -- $7.0 million class SB-E at 'AAA'; Outlook Stable; -- $5.5 million class ES-A at 'AA'; Outlook Stable; -- $4 million class ES-B at 'AA-'; Outlook Stable; -- $4.3 million class ES-C at 'A+'; Outlook Stable; -- $4.5 million class ES-D at 'A'; Outlook Stable; -- $3.1 million class ES-E at 'A-'; Outlook Stable; -- $3.1 million class ES-F at 'BBB+'; Outlook Stable; -- $3.1 million class ES-G at 'BBB'; Outlook Stable; -- $9.6 million class ES-H at 'BBB-'; Outlook Stable. Fitch does not rate the $17.4 million class P, $16.2 million class WB-A, $8.2 million class WB-B, $1.8 million class WB-C, or $1.8 million class WB-D certificates. The rating affirmations are the result of sufficient credit support to absorb Fitch expected losses on specially serviced loans. The Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the November 2008 distribution date, the pool's aggregate principle balance has decreased 12.5% to $994.9 million from $1,032.7 million at issuance. In total, 26 loans (38.6%) have defeased, including the shadow rated Sotheby's Building loan (11.7%) and Wellbridge Portfolio loan (5.2%). Fitch has identified seven loans of concern (3.0%) of which four loans (2.1%) are currently in special servicing. Losses are expected on all loans but will be absorbed by the unrated class P. The largest Fitch Loan of Concern (0.9%) is secured by a 224 unit multifamily property in Dallas, TX. The loan transferred to the special servicer in October 2008 and is 60 days delinquent. The servicer reported year-end (YE) 2007 debt service coverage ratio (DSCR) was 0.75 times (x) with an occupancy of 85%. The second largest Fitch Loan of Concern (0.8%) is secured by 13 office buildings in Scottsdale, AZ. The loan transferred to the special servicer in April 2008 because of the borrower's request for relief in the form of waiving the defeasance requirement and anticipated imminent default. The property's occupancy has declined to 16% and there is no effort to lease the vacant space. The third largest Fitch Loan of Concern (0.5%) is secured by a 68,082 square feet (sf) retail property in Dallas, TX. The property's occupancy has declined to 74% as of June 2008 compared to 93% at issuance. Fitch reviewed the remaining shadow rated loan and the June 2008 rent roll: Emerald Square Mall (13.3%), the largest loan in the pool that is secured by a regional mall in North Attleboro, MA. The loan maintains its investment grade shadow rating due to stable performance. As of YE 2007 the property had a servicer reported DSCR of 1.75x and an occupancy of 94% compared to 2.68x and 93% at issuance. The loan is divided into an A (9.6%) and a B (2.6%) note: the A note, which has been contributed to the pooled proceeds and the B-note, which is structured as stand-alone rake classes. It is an amortizing balloon loan and is scheduled to mature in March 2013. BANK OF AMERICA: Fitch Holds Low-B Ratings on 4 Classes of Certs. ----------------------------------------------------------------- Fitch Ratings affirms Bank of America Commercial Mortgage Inc. (BACM), series 2003-2, commercial mortgage pass-through certificates, and assigns Rating Outlooks: -- $422.6 million class A-1A at 'AAA' Outlook Stable; -- $59.6 million class A-2 at 'AAA' Outlook Stable; -- $168.1 million class A-3 at 'AAA' Outlook Stable; -- $482.3 million class A-4 at 'AAA' Outlook Stable; -- Interest-only class XC at 'AAA' Outlook Stable; -- Interest-only class XP at 'AAA' Outlook Stable; -- $56.7 million class B at 'AAA' Outlook Stable; -- $21.0 million class C at 'AAA' Outlook Stable; -- $44.1 million class D at 'AAA' Outlook Stable; -- $23.1 million class E at 'AAA' Outlook Stable; -- $21.0 million class F at 'AA' Outlook Stable; -- $23.1 million class G at 'AA-' Outlook Stable; -- $21.0 million class H at 'A' Outlook Stable; -- $18.9 million class J at 'BBB+ Outlook Stable; -- $10.5 million class K at 'BBB-' Outlook Stable; -- $10.5 million class L at 'BB' Outlook Stable; -- $8.4 million class M at 'BB-' Outlook Stable; -- $8.4 million class N at 'B+ Outlook Negative; -- $4.2 million class O at 'B' Outlook Negative; -- $2.7 million class BW-A at 'AAA' Outlook Stable; -- $1.2 million class BW-B at 'AAA' Outlook Stable; -- $8.7 million class BW-C at 'AAA' Outlook Stable; -- $2.6 million class BW-D at 'AAA' Outlook Stable; -- $3.6 million class BW-E at 'AAA' Outlook Stable; -- $3.2 million class BW-F at 'AAA' Outlook Stable; -- $3.1 million class BW-G at 'AAA' Outlook Stable; -- $2.6 million class BW-H at 'AAA' Outlook Stable; -- $2.6 million class BW-J at 'AAA' Outlook Stable; -- $2.1 million class BW-K at 'AAA' Outlook Stable; -- $3.5 million class BW-L at 'AAA' Outlook Stable. Fitch does not rate the $23.2 million class P or classes HS-A, HS-B, HS-C, HS-D or HS-E. Class A-1 is paid in full. The Negative Outlooks are due to losses from one loan modification and expected losses from a loan currently in special servicing. The affirmations are due to sufficient credit enhancement due to paydown and defeasance. The remainder of the pool has exhibited stable performance and minimal pay down. As of the November 2008 distribution date, the pool's aggregate certificate balance has decreased 14.4% to $1.51 billion from $1.77 billion at issuance. In total 27 loans (30.54%) have defeased, including 1328 Broadway (7.9%), a shadow rated and second largest loan in the pool. The modified loan is secured by a 121-unit multifamily property in Laramie, WY. The coupon rate is 4.9% and maturity is August 2014. The loan is performing under modification after the principal was written down by $4,000,000. Losses of $3,908,865 were realized by the trust. The loan currently in special servicing is secured by a 561 unit multi-family property located in Irving, TX. The loan transferred to special servicer in October 2008 when the borrower submitted a letter stating their intention to return the property to the lender. Currently, the foreclosure is set for early 2009 and the loan is 60 days delinquent. Given the Negative Outlook for the multi-family market in Texas, a preliminary Fitch value indicates losses. Per the March 31, 2008 servicer operating statement analysis, the property was 95% occupied and had a debt service coverage ratio (DSCR) of 0.92 times(x). Hines-Sumitomo Portfolio (14.0%) and Newgate Mall (2.7%) maintain their investment grade shadow ratings based on stable loan performance. The Hines Sumitomo portfolio, the largest loan in the pool, is secured by three office properties, two of which are located in New York, NY and the third in Washington, DC. The property located in Washington DC is undergoing a complete redevelopment after the two largest tenants vacated at the end of 2007. The property is essentially vacant except for a few retain tenants. Three additional floors are being added to the building to bring the total square footage (sf) to 335,000 from 235,000. Construction is expected to be completed in the second quarter of 2009. Approximately 70,000 sf to 80,000 sf of the new building is pre-leased. Performance of the other two properties has improved significantly since issuance and compensates for the majority of the cash flow lost due to the redevelopment. The loan is interest only with a maturity date in 2013. The senior pooled portion has a coupon of 4.78% and the non-pooled portion has a coupon of 4.98% Newgate Mall is a 724,619 square feet anchored retail center in Ogden, UT. Occupancy remained has declined to 86.1% from 94.7% at issuance primarily due to the bankruptcy of Mervyn's. Excluding the Mervyn's cash flow, the property is still producing cash flow in excess of expectations at issuance. The loan is a balloon with a coupon rate of 4.8% and maturity in 2010. Only 0.8% of the pool matures in 2008 and no loans are scheduled to mature in 2009. The weighted average coupon rate is 5.4%. There are currently 11 (6.91%) Fitch loans of concern due to declining DSCR or occupancy, and include the specially serviced loan. BEAR STEARNS: Fitch Affirms Low-B Ratings on 3 Classes of Certs. ---------------------------------------------------------------- Fitch Ratings affirms and assigns Rating Outlooks for Bear Stearns Commercial Mortgage Securities Inc.'s mortgage pass-through certificates, series 2002-PBW1: -- $142.2 million class A-1 at 'AAA'; Outlook Stable; -- $385.9 million class A-2 at 'AAA'; Outlook Stable; -- Interest-only classes X-1 and X-2 at 'AAA'; Outlook Stable; -- $26.5 million class B at 'AAA'; Outlook Stable; -- $31.1 million class C at 'AAA'; Outlook Stable; -- $8.1 million class D at 'AAA'; Outlook Stable; -- $9.2 million class E at 'AAA'; Outlook Stable; -- $13.8 million class F at 'AAA'; Outlook Stable; -- $13.8 million class G at 'AA'; Outlook Stable; -- $16.1 million class H at 'A'; Outlook Stable; -- $10.4 million class J at 'BBB+'; Outlook Negative; -- $3.5 million class K at 'BBB'; Outlook Negative; -- $5.8 million class L at 'BB'; Outlook Negative; -- $9.2 million class M at 'B+'; Outlook Negative; -- $2.3 million class N at 'B'; Outlook Negative. Fitch does not rate the $13.8 million class P. The rating affirmations reflect stable performance of the pool since Fitch's last rating action. Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. As of the December 2008 distribution date, the pool has paid down 24.9%, to $691.5 million from $921.2 million at issuance. Nineteen loans (31.1%) are defeased, including Belz Outlet Center (8.2%), the largest loan in the transaction which has an investment grade shadow rating from Fitch. Fitch has identified eighteen loans as Fitch Loans of Concern (11.8%), including one specially serviced loan (1.6%). The loan transferred to the special servicer at the end of November 2008 due to payment default. The specially serviced asset is a 300- unit garden apartment complex in Stone Mountain, GA. The servicer reported debt service coverage ratio (DSCR) is 0.70 times (x) as of June 2008, compared to 1.39x at issuance. The area has suffered from declining economic conditions. The largest Fitch loan of concern (3.3%) is secured by a 294,850 square foot (sf) office property located in Dayton, OH. Although servicer reported DSCR is 1.55x as of June 2008, occupancy has declined to 65.9% from an occupancy of 82.8% at year-end (YE) 2007. Fitch reviewed the two non-defeased shadow rated loans in transaction, the RREEF Textron Portfolio (4.7%), and the CNL Retail Portfolio (2.8%). Both loans maintain investment grade shadow ratings due to stable performance. The RREEF Textron Portfolio loan is secured by seven properties located in various states, including three multifamily complexes, one retail property, one office building, one industrial portfolio and one industrial park. The Fitch calculated weighted average portfolio occupancy as of September 2008 was 93.6%, compared to 93.7% at issuance. The pari passu A-Note loan in the trust is split into a seven year tranche and ten year tranche, with the seven year tranche scheduled to mature in 2009. The CNL Retail Portfolio loan is secured by five single tenant retail stores totaling 210,885-sf located in Florida and Virginia. The properties continue to be 100% occupied by the five tenants since issuance: Barnes & Noble, Sweetbay Supermarkets (f/k/a Kash n' Karry), Bed Bath & Beyond, Best Buy and Borders Books. The loan is scheduled to mature in 2012. No loans are scheduled to mature in 2008. Five loans (14.3%) are schedule to mature in 2009, including four non-defeased loans (6%). Interest rates on these loans range from 5.95% to 8.04%, with weighted average mortgage coupon at 6.92%. Loan maturities are concentrated in 2012 when 59.5% of the pool, excluding the defeased loans, will mature. BEAR STEARNS: S&P Junks Ratings on 4 Classes of Certificates ------------------------------------------------------------ Standard & Poor's Ratings Services lowered it ratings on 12 classes of asset-backed certificates issued by Bear Stearns Asset Backed Securities Trust 2007-SD2. "Concurrently, we affirmed our ratings on eight classes from the same transaction," S&P said. "The downgrades reflect the accelerated deterioration in the collateral performance during the most recent five months. As of the November 2008 distribution period, approximately 76% of all losses to date for each of the two loan groups, were incurred during these five months. During this period, loan group one accumulated roughly $2.18 million of its $2.84 million total losses to date or 1.92% of its original balance, while loan group two accumulated approximately $10.68 million of its $13.92 million total losses to date or 6.85% of its original balance. Furthermore, as of the November 2008 distribution, total delinquencies were 24.18% and 40.05% for loan groups one and two, respectively. As a result, the credit support to the downgrade classes has diminished significantly, which prompted us to downgrade classes II-M-4 and II-M-5 to 'D'. The transaction is 20 months seasoned and loan groups one and two have 75.35% and 69.21% of their original principal balances outstanding, respectively. "The affirmations reflect adequate credit support to maintain the ratings at their current levels. "Subordination provides credit support for loan groups one and two, while overcollateralization and excess interest provide additional credit support for loan group two. "The collateral for loan group one consists primarily of 30-year, fixed-rate, fully amortizing first-lien mortgage loans. The collateral for loan group two consists primarily of 30-year, adjustable-rate or hybrid, fully or negatively amortizing, first- lien mortgage loans." RATINGS LOWERED Bear Stearns Asset Backed Securities Trust 2007-SD2 Asset-backed certificates series 2007-SD2 Rating Class To From I-B-1 A AA I-B-2 BB A I-B-3 B BBB I-B-4 CCC BB I-B-5 CC B II-A-1 BB AAA II-A-2 BB AAA II-M-1 B AA+ II-M-2 CCC AA II-M-3 CC A II-M-4 D BBB II-M-5 D BBB- RATINGS AFFIRMED Bear Stearns Asset Backed Securities Trust 2007-SD2 Asset-backed certificates series 2007-SD2 Class Rating I-A-1A, I-A-1B, I-PO, I-A-2A, I-A-2B AAA I-A-3A, I-A-3B, I-X AAA BERKELEY PREMIUM: $2.75MM Sale to Pristine Bay Approved ------------------------------------------------------- The Chapter 11 trustee for Berkeley Premium Nutraceuticals Inc., won tentative approval from the U.S. Bankruptcy Court, Southern District of Ohio (Cincinnati) to sell the company's assets to its landlord for $2.75 million, Bloomberg News' Bill Rochelle reported. According to Mr. Rochelle, citing court records, no competing bids were made against the $2.75 million offer. As reported by the Oct. 13 issue of the Troubled Company Reporter, citing Bloomberg News, the Chapter 11 Trustee asked for authority from the U.S. Bankruptcy Court for the Southern District of Ohio on Oct. 7, 2008, to sell its assets for at least $2.75 million to Pristine Bay. Pristine Bay, an affiliate of the Debtor's lender, Interim Loan LLC, was selected the stalking horse bidder. Berkeley filed for bankruptcy after a bank and mail fraud conviction resulted in a judgment for $474 million. Eleven company officers including the owner pleaded guilty to crimes following a government investigation that began in 2004. Cincinnati, Ohio-based Berkeley Premium Nutraceuticals, Inc. -- http://www.berkeleypremiumnutraceuticals.com/-- makes dietary supplements. The Company filed for Chapter 11 bankrupt protection on September 16, 2008 (Bankr. S.D. Ohio Case No. 08-15012). Kim Martin Lewis, Esq., and Patrick Burns, Esq., at Dinsmore & Shohl LLP represent the Debtor in its restructuring efforts. The Debtor listed estimated assets between $1,000,000 to $10,000,000 and liabilities between $100,000,000 to $500,000,000. BLUE AND GREEN: Bankruptcy Case Ends; Creditors Recover 100% ------------------------------------------------------------ Thomas Lehman, partner at Tew Cardenas LLP, reported the closing of the Blue and Green Diamond condominium bankruptcy case, with all creditors receiving 100% payments for their claims. "Unlike a typical real estate bankruptcy -- where the only creditor to get money back is the construction lender -- our team was able to generate more than $69 million from the sale of assets," said Mr. Lehman, who represented developer New Florida Properties throughout the five-year bankruptcy process. "In this case we were able to pay 100% to all the creditors and provide funds to the condominium association for final completion of the project. It was a very successful result." Construction on the Blue and Green Diamonds -- whose two 45-story oceanfront condominium towers on Miami Beach were among the tallest such buildings in the U.S. -- began in the late 1990s with completion in 2000. However, only about two-thirds of the development's 630 residential units had been sold. In November 2001, Union Planters Bank filed for foreclosure on a $50 million plus construction loan, and three months later New Florida Properties, led by Brazilian developer Mucio Athayde, filed for Chapter 11 bankruptcy protection. "At that time, the project was under a dark cloud," said Mr. Lehman. "Brokers wouldn't sell units, the subcontractors would not work on the Blue and Green Diamonds and the construction lender would not provide funds to complete the work. By filing for Chapter 11 bankruptcy, we were able to address all those issues in a transparent manner, and put the entire project in a more positive light." Under an agreement approved by U.S. Bankruptcy Judge Jay Cristol, the reorganized project emerged from bankruptcy, supported by a team of professionals working with Lehman to maximize the asset's values. That included selling the remaining 136 units, along with 20 cabanas, 14 parking spaces and 130 storage lockers. Those sales provided funds for 100% payouts to all creditors, with a $3.6 million final return to the original developer. After sending out those checks in November, the bankruptcy case was finally closed by Judge Cristol. "It took five years, but in the end every creditor of the Blue and Green Diamond bankruptcy case was paid in full," said Barry Mukamal, a partner at Rachlin LLP who was named plan administrator on the case in 2006. "So were the subcontractors, the real estate brokers and the condominium associations. In this case, achieving a consensus on a long-term strategy to sell the units at 'retail' to individual buyers proved highly beneficial to all the creditors." "While every bankruptcy is unique," Mr. Mukamal concludes. "I believe we have established the foundation of a formula that can be of tremendous benefit for these types of workouts." About Tew Cardenas Tew Cardenas LLP -- http://www.tewlaw.com-- is a full service law firm with offices in Miami, Tallahassee and Washington, D.C. The firm represents, advises, and advocates for a wide array of clients, including domestic and international companies, federal, state and local governments, as well as foreign governments and individuals. The Tew Cardenas team possesses vast experience across industries including aviation, communications, construction, energy, financial services, food & beverage, hospitality, real estate development, retail and pharmaceutical. About Blue & Green Diamond Blue & Green Diamond Condominium is located at Miami Beach, Florida. Its condominiums are located on over 500 feet of beachfront and are currently the tallest ocean front condos in the USA. BOWNE & CO: S&P Cuts Credit Rating to B & Junks Debentures Rating ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Bowne & Co. Inc. to 'B' from 'BB-'. "We also lowered the issue-level rating on Bowne's convertible subordinated debentures to 'CCC+' (two notches lower than the 'B' corporate credit rating), from 'B'. These ratings remain on CreditWatch, where they were placed with negative implications Nov. 12, 2008. The recovery rating on the subordinated debt remains at '6', indicating our expectation of negligible (0% to 10%) recovery for lenders in the event of a payment default," S&P said. "The ratings downgrade reflects the rapid deterioration in Bowne's operating performance and, consequently, the potential for a near- term covenant violation," said Standard & Poor's credit analyst Michael Listner. "Although our expectations for Bowne's operating performance have always factored in the highly cyclical nature of revenue and profitability for the firm, the current operating trends have exceeded our earlier expectations given the extent of the credit freeze and its impact on transaction volume. We anticipate that transactional revenue will continue to be depressed into 2009, putting further pressure on Bowne's profitability and credit measures. "The continued CreditWatch listing reflects our concern over the possibility of a near-term violation of the total leverage covenant and an expectation for heightened leverage and limited liquidity during the first half of 2009, as the company typically uses cash for working capital purposes in the first half of the year and repays debt in the latter half. In resolving the CreditWatch listing, Standard & Poor's will monitor the progress and resulting terms of an expected required amendment to the company's senior credit facility. Ratings may be lowered further in the near term if a resolution is not put in place to address pressures on the capital structure and covenant compliance." BOYD GAMING: Fitch Says Industry to Remain Under Pressure in 2009 ---------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) BRIAN TUTTLE: Court Approves Sale of Interest in Jonal Mortgage --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of Florida approved Brian R. Tuttle and Merja A. Tuttle's emergency motion permitting TLH-Kram Corp, a related company of the Debtors to sell and transfer its partial interest in the Jonal Mortgage to AMKBJ Partners Ltd. LLP for $537,491, in order to provide the funds for certain obligations of the Debtors and TLH BOS Corp. TLH-Kram Corp. will distribute the funds to the Debtors, as sole beneficiaries of the Trust, which is a shareholder of TLH-Kram Corp. Brian and Merja Tuttle shall make the required capital contribution to North Port Land Investment, L.L.L.P. $500,000 of the sale proceeds will be treated as a Capital Contribution by the Debtor entity TLH-BOS Corp., the general partner of North Port Land. The remaining $37,491 from the sale of the Jonal Mortgage shall be paid to Brian and Merja Tuttle to fund living expenses. Brian R. Tuttle and Merja A. Tuttle of West Palm Beach, Florida, are real estate developers. They filed for chapter 11 bankruptcy on October 15, 2008, before the U.S. Bankruptcy Court for the Southern District of Florida (Case No. 08-25253). Debtor- affiliates that filed separate Chapter 11 petitions are Tuttle Land Holding Corp. (Case No. 08-25255) and TLH-BOS Corp. (Case No. 08-25256). Judge Paul G. Hyman Jr. presides over the case. Robert C. Furr, Esq., and Alvin S. Goldstein, Esq., at Furr & Cohen, serves as the Debtors' bankruptcy counsel. In their schedules, the Debtors listed total assets of $69,338,910 and total debts of $23,605,666. On Oct. 15, 2008, the Tuttles filed with the Court a Chapter 11 statement of current monthly income, disclosing $18,333 in total current monthly income, including $14,000 net monthly income from business operations. BROOKE CAPITAL: Founder Files Bankruptcy Trying to Save Firm ------------------------------------------------------------ Robert Orr filed personal bankruptcy after pledging his family fortune trying to save Brooke Capital Corporation, an insurance agency franchisor and a public company, and Aleritas Capital Corp., a finance company specializing in insurance lending and a public company of which Orr's family indirectly owned approximately 29%. Aleritas loaned money to insurance agencies, then packaged the loans as securities and sold them to Wall Street investors. To enhance the credit quality of these securities, Brooke Capital provided franchising and consulting services to insurance agency borrowers on behalf of the Wall Street investors. The refusal of Wall Street investors to pay servicing fees for the consulting and collateral preservation services provided by Brooke Capital caused the insurance agency franchisor to collapse from cash flow shortages and the finance company to collapse from deterioration of loan quality because the insurance agency franchisor could no longer afford to provide these critical services to the finance company's borrowers. The meltdown of these companies accelerated when a special master, who was appointed by the court to maintain the status quo until Brooke Capital's differences with Wall Street investors were resolved, instead liquidated assets and released insurance agency franchisees from their agreements. With Brooke Capital in bankruptcy and Aleritas in liquidation, it is unlikely Orr will see repayment of approximately $12,000,000 that his family loaned to the companies in recent months. Another result of the companies' collapse is that Orr will be required to repay approximately $25,000,000 of debt that was personally guaranteed by him as part of Orr's efforts in recent months to turn around the companies. "Last year I retired as a company executive, but I came out of retirement in April of this year to help Aleritas, and later Brooke Capital, through difficult economic times," Mr. Orr said. "With the benefit of hindsight, I regret returning as a company executive because the price paid by my family has been extraordinary. I have endured financial ruin and unwarranted personal attacks," he said "As an executive taking over management of these troubled companies just prior to their collapse and as an executive responsible for making the difficult decisions required to turnaround these troubled companies, I have become the target of attack for anyone with a complaint," Mr. Orr continued. Last year, as a result of merging wholly owned Brooke Capital and wholly owned Aleritas into existing public companies, most of the stock of Aleritas and Brooke Capital became directly, or indirectly, owned by public investors. "When Aleritas and Brooke Capital became public companies last year, I believed that I could slow down after a lifetime of 60-70 hour weeks," Mr. Orr related. "I believed that my involvement as an executive was not required because, as an investor in public companies, my investment would be protected by the management accountability demanded by independent directors, exchange listing provisions, sophisticated investors and auditors," Mr. Orr added. After Aleritas became a public company, Orr did not serve as a director or officer. After Brooke Capital became a public company, Orr remained as a director but relinquished all executive responsibilities. Mr. Orr said, "In March of this year it became apparent that I was naive to rely on public company safeguards to protect my investment in Aleritas." Aleritas had become financially troubled primarily as a result of increased loan losses, a failed refinancing transaction and rapid expansion in a difficult economy. In response to a request from Aleritas' largest purchaser of loan participations, Orr asked for an emergency meeting of the Aleritas board on March 31, 2008 to demand the changes required for a turnaround of the company, including the appointment of Orr as interim chief executive officer of Aleritas until the company found a capable replacement with turnaround experience. Over the next several weeks, Mr. Orr announced to investors: a) a $24 million charge for loan losses and credit impairments, b) suspension of the company's growth plans; and c) the proposed steps to complete the failed refinancing transaction. During the five months that Mr. Orr and Michael Hess were Aleritas executives, many unpopular and difficult decisions were implemented which they believed were required to turn the company around, including: a) working with Brooke Capital to mitigate loan losses despite previous tensions between Aleritas and Brooke Capital; b) negotiating with recalcitrant Wall Street investors for payment of servicing fees to assure Brooke Capital's continued assistance; c) negotiating with lenders to remedy liquidity concerns; and d) reducing the amounts of collateral pledge and loan payment discrepancies existing on March 31st when Orr and Hess became Aleritas executives. Especially difficult were the decisions made to reduce collateral pledge and loan payment discrepancies because this involved decisions regarding payment priorities and collateral quality. Mr. Orr and Hess first required the completion of conversion to a new loan accounting process to better track and control collateral pledges and loan payments. Although discrepancies were significantly reduced after March 31st, the resolution of those discrepancies existing on March 31st sometimes evolved into different discrepancies as Orr and Hess tried to fairly resolve these issues. Brooke Capital has historically provided critical assistance to franchise agency borrowers as part of a servicing agreement with Wall Street investors. During August Brooke Capital experienced significant cash flow problems because Wall Street investors refused to pay past due servicing fees owed to Brooke Capital. Apparently frustrated that they could not collect past due servicing fees and resolve the company's cash flow problems, Brooke Capital's chief executive officer, chief operating officer, senior vice president and general counsel resigned. Mr. Orr reluctantly stepped in on August 19th to fill the management void in Brooke Capital and aggressively pursued collection of past due servicing fees during the ensuring month that he served as Brooke Capital's chief executive officer. Allegations of funds misappropriation leveled against Orr by WallStreet investors were primarily the result of Brooke Capital offsetting the past due amounts it was owed from Wall Street investors by the amounts that Brooke Capital owed to Wall Street investors. These offsets were approved by Brooke Capital's legal counsel and summarized in a court motion. The dispute between Wall Street investors and Brooke Capital culminated in the appointment of a special master on Sept. 17, 2008, and the resulting collapses of Aleritas and Brooke Capital. Mr. Orr summarized by saying, "Until the meltdown caused by Wall Street investors, I was confident that Aleritas and Brooke Capital were taking the difficult steps required to turn around the companies. As a result, my family did not sell any stock -- until it was seized by the creditors for repayment of a company loan -- and instead purchased approximately $2,000,000 in additional stock during 2008. I believed in Aleritas and Brooke Capital." About Brooke Corp. Headquartered in Kansas, Brooke Corp. (NASDAQ: BXXX) -- http://www.brookebanker.com-- is an insurance agency and finance company. The company owns 81% of Brooke Capital. The majority of the company's stock was owned by Brooke Holding Inc., which, in turn was owned by the Orr Family. A creditor of the family, First United Bank of Chicago, was foreclosed on the BHI stock. The company's revenues are generated from sales commissions on the sales of property and casualty insurance policies, consulting, lending and brokerage services. Brooke Corp. and its affiliate, Brooke Capital Corp. filed for Chapter 11 protection on Oct. 28, 2008 (Bankr. D. Kan. Case No. 08-22786). Angela R Markley, Esq., is the Debtors' in-house counsel. The Debtors listed assets of $512,855,000 and debts of $447,382,000. BROOKSTONE INC: S&P Affirms B Rating & Revises Outlook to Negative ------------------------------------------------------------------ Standard & Poor's Ratings Services revised its outlook on Merrimack, N.H.-based Brookstone Inc. to negative from stable. "At the same time, we affirmed all ratings on the company, including the 'B' corporate credit rating," S&P said. "The revision reflects the severe cutback in consumer spending and our expectations for performance to be below expectations for the fourth quarter," said Standard & Poor's credit analyst David Kuntz. CBRE REALTY: S&P Keeps Low-B Ratings on 3 Classes on WatchNegative ------------------------------------------------------------------ Standard & Poor's Ratings Services placed its ratings on three classes from CBRE Realty Finance CDO 2007-1 Ltd. (CBRE 2007-1) on CreditWatch with negative implications. The ratings on nine other classes from the transaction remain on CreditWatch with negative implications, where they were originally placed Aug. 18, 2008. According to S&P: "The additional CreditWatch placements follow further analysis of the transaction after we re-valued the Riverton Apartments. The property is a 1,230-unit apartment complex in Harlem, N.Y. It is encumbered by a whole loan that is the sixth-largest loan ($225 million, 3%) in the CD 2007-CD4 transaction. Three percent of the CBRE 2007-1 asset pool is a related mezzanine loan totaling $25 million. The mezzanine debt is secured by the equity interests in the Riverton borrower, and is subordinate to the whole loan. According to the Oct. 31, 2008, trustee report, the mezzanine debt was reported as an impaired asset. Standard & Poor's recently re-valued the Riverton property, which has contributed to six rating actions on CD 2007- CD4. The property has experienced a substantial valuation decline of 52% since issuance. "We placed our ratings on nine classes from CBRE 2007-1 on CreditWatch negative in August because of concerns with the Riverton loan. At that time, the whole loan in CD 2007-CD4 was transferred to the special servicer after the borrower gave notice it would not be able to make its Sept. 1, 2008, debt service placement. [The] CreditWatch placements reflect the recent property valuation. "We will resolve the CreditWatch negative placements on CBRE 2007-1 when we complete our analysis of the transaction, which will follow discussions with the collateral manager, CBRE Realty Finance Management LLC. Since the transaction is an actively managed collateralized debt obligation (CDO), it is possible that the transaction's pool composition could change in a manner that offsets some of the credit deterioration prompted by the Riverton mezzanine loan." RATINGS PLACED ON CREDITWATCH NEGATIVE CBRE Realty Finance CDO 2007-1 Ltd. Commercial real estate CDO Rating Class To From ----- -- ---- A-2 AAA/Watch Neg AAA A-2R AAA/Watch Neg AAA B AA/Watch Neg AA RATINGS REMAINING ON CREDITWATCH NEGATIVE CBRE Realty Finance CDO 2007-1 Ltd. Commercial real estate CDO Class Rating ----- ------ C A+/Watch Neg D A/Watch Neg E A-/Watch Neg F BBB+/Watch Neg G BBB/Watch Neg H BBB-/Watch Neg J BB+/Watch Neg K BB/Watch Neg L BB-/Watch Neg CD 2007-CD4: S&P Lowers Ratings on Six Classes of Securities ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on six classes of commercial mortgage-backed securities from CD 2007-CD4 and removed them from CreditWatch with negative implications, where they were placed Aug. 18, 2008. "In addition, we affirmed our ratings on 16 classes from the same transaction," S&P said. Standard & Poor's revised valuation for the Riverton Apartments (Riverton) loan is the primary driver of the downgrades. Standard & Poor's valuation for this loan has declined substantially since issuance of the securities. The downgrades also reflect our concerns with loans that have reported low debt service coverage (DSC), or will have low DSC when their initial interest-only (IO) periods end. "The affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios. RIVERTON CREDIT CONCERNS "The Riverton loan is the sixth-largest loan in the pool ($225 million, 3%) and is secured by a 1,230-unit apartment complex in Harlem, N.Y. In addition to the senior debt, the equity interests of the borrower are secured by a $25 million mezzanine loan (3%) that serves as collateral in the CBRE Realty Finance CDO 2007-1 Ltd. transaction. The master servicer for the loan, Wachovia Bank N.A. (Wachovia), transferred the loan to CWCapital on Aug. 8, 2008, after the borrower gave notice that it would not be able to make the Sept. 1, 2008, debt service payment. "The borrower was late with the monthly payment as of the December 2008 remittance report, but the loan was less than 30-days delinquent. As of the December remittance, the loan had additional advances, including interest thereon, totaling $2.3 million. CWCapital and the borrower had agreed on terms for a loan modification, but have not executed a modification to date. CBRE Realty Finance Management LLC, the mezzanine lender, has scheduled a foreclosure sale on Feb. 20, 2009. "Standard & Poor's revaluation of the Riverton loan incorporated the borrower's financial statements for Dec. 31, 2007, and Sept. 30, 2008, the property's December 2008 rent roll, current market occupancy and rental rate information, and estimates for conversion costs and recapture rates. Standard & Poor's adjusted valuation has declined 52% from its level at issuance. The drivers of the valuation decline include: -- Operating expenses are 24% higher than we anticipated at issuance. Utilities, administrative costs, security, repairs, and maintenance are the main contributors to the increased expenses. -- The weighted average rent at market-rent units is 22% lower than we anticipated, due in part to current economic conditions. -- The number of units that have been converted to market is less than we expected. This is due to a lack of units obtained through a tenant buyout program. There are currently 142 units at market rents, compared with our assumption at issuance of 263 units. -- The items noted above have affected the property's current net cash flow. They have reduced projected net cash flows below the levels we used in our valuation process, which utilized a 10-year discounted net cash flow. The resulting terminal valuation is 52% lower than our estimate at issuance. The combination of the size of the loan in the transaction and the large decline in our value were the drivers of the negative rating actions on CD 2007-CD4. "In addition to the value decline, a $19 million debt service reserve funded at issuance by Stellar Management (Stellar) and Rockpoint Group LLC, the borrowers of the Riverton loan, has been depleted. Currently, there are also two letters of credit totaling $5.0 million outstanding. Additionally, the loan's base building reserve account has been r educed to $3.7 million from $15.6 million at issuance, and the unit replacement reserve account has been reduced to $7.1 million, down from $13.6 million at issuance. "Standard & Poor's met with representatives from Stellar and CWCapital on Sept. 23, 2008, to tour the property. Since purchasing the Riverton Apartments in 2005, Stellar has installed a fence around the property, installed video camera surveillance, repaved the walkways, and moved the management office to a new location. Excluding the continued renovation of recaptured units, Stellar is not planning any additional major renovations to the property. ADDITIONAL CREDIT CONCERNS "In addition to our concerns with the Riverton loan, we have credit concerns with several loans that have reported low DSC ($850.6 million, 13%), loans that will have a low DSC when their initial IO periods end ($54.7 million, 1%), and the four other specially serviced assets (excluding Riverton). Given current market conditions, Standard & Poor's is placing particular focus on loans that have experienced net cash flow declines, and we are increasing our expected losses for loans that we determine to be at increased risk of default. Details for such loans are: -- There are 45 loans ($991.0 million) that have or will have a reported low DSC. The loans that reported low DSC have experienced a weighted average decline in DSC of 40% since issuance. Twenty-eight ($305.1 million) of the 45 loans are credit concerns. Excluding the Riverton loan, the largest loan that is a credit concern is the Lowes at Lake Las Vegas ($117.0 million, 2%). The IO loan is secured by a 493-room full-service resort hotel in Henderson, Nev. The trailing-12-month revenue per available room (RevPAR) at the property for the period ending Oct. 31, 2008, was $103.77, down from $126.84 for the comparable period in 2006. The performance at the property is down primarily because of fewer group bookings and increased cancellations. Wachovia reported a DSC of 0.37x for the period ending June 30, 2008. TRANSACTION SUMMARY "As of the December 2008 remittance report, the collateral pool consisted of 378 loans with an aggregate trust balance of $6.6 billion, unchanged since issuance. Wachovia Bank N.A. reported financial information for 94% of the pool. All of the servicer- provided information was full-year 2007 data or interim 2008 data. Standard & Poor's calculated a weighted average DSC of 1.47x for the pool, up from 1.36x at issuance, on an as-is basis. Four loans ($13.6 million, 0.2%) in the pool are delinquent and are currently with CWCapital. The transaction has not experienced any losses to date. "The top 10 exposures have an aggregate outstanding balance of $2.5 billion (38%) and a weighted average DSC of 1.66x, down from 1.89x at issuance. Standard & Poor's reviewed property inspections provided by the master servicer for five of the assets underlying the top 10 exposures in the transaction. One property was characterized as "excellent," while the remaining properties were characterized as "good." "The credit characteristics of the Ala Moana Portfolio, 9 West 57th Street, and One World financial Center loans are consistent with those of investment-grade rated obligations. Standard & Poor's adjusted values for these loans are comparable to the valuations at issuance. "Standard & Poor's stressed the loans on the servicer's watchlist and the loans with credit issues as part of its analysis. The resultant credit enhancement levels support the lowered and affirmed ratings." RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE CD 2007-CD4 Commercial mortgage pass-through certificates series 2007-CD4 Rating Class To From Credit enhancement (%) ----- -- ---- ---------------------- E A A+/Watch Neg 7.65 F A- A/Watch Neg 6.89 G BBB+ A-/Watch Neg 5.89 H BBB BBB+/Watch Neg 4.76 J BB+ BBB/Watch Neg 3.76 K BB- BBB-/Watch Neg 2.63 RATINGS AFFIRMED CD 2007-CD4 Commercial mortgage pass-through certificates series 2007-CD4 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.09 A-2A AAA 30.09 A-2B AAA 30.09 A-SB AAA 30.09 A-3 AAA 30.09 A-4 AAA 30.09 A-1A AAA 30.09 A-MFX AAA 20.06 A-MFL AAA 20.06 A-J AAA 11.16 B AA+ 10.53 C AA 9.15 D AA- 8.27 X-P AAA N/A X-C AAA N/A X-W AAA N/A N/A -- Not applicable. CENTURY ALUMINUM: S&P Puts 'BB-' Rating on Negative CreditWatch --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings, including its 'BB-' corporate credit rating, on Monterey, Calif.-based Century Aluminum Inc. on CreditWatch with negative implications. "The CreditWatch listing reflects our concern that the company's operating results and liquidity will be significantly affected by the recent steep decline in aluminum prices," said Standard & Poor's credit analyst Marie Shmaruk. "Although Century's operations in Iceland are relatively low cost, they are unlikely to fully offset losses that we expect will be generated at the company's higher cost domestic operations. Moreover, its liquidity position, consisting of $169 million in cash and about $88 million available on its $100 million revolving credit facility at Sept. 30, 2008, may be stretched if low prices persist. "In resolving the CreditWatch listing, we will evaluate management's plans for dealing with the extremely difficult operating conditions, including plans, if any, to restructure its business and to enhance its liquidity. CHASE COMMERCIAL: Fitch Affirms Low-B Ratings on Two Classes ------------------------------------------------------------ Fitch Ratings upgrades Chase Commercial Mortgage Securities Corp.'s, commercial mortgage pass-through certificates, series 1998-2, and assigns Outlooks: -- $57.1 million class F to 'A+' from 'BBB+'; Stable Outlook; -- $12.7 million class G to 'A-' from 'BBB-'; Stable Outlook. Fitch also affirms and assigns outlooks to these classes: -- Interest-only class X at 'AAA'; Stable Outlook; -- $51.8 million class C at 'AAA'; Stable Outlook; -- $72.9 million class D at 'AAA'; Stable Outlook; -- $19 million class E at 'AAA'; Stable Outlook; -- $22.2 million class H at 'B+'; Stable Outlook; -- $9.5 million class I at 'B-'; Negative Outlook. The $13.3 million class J is not rated by Fitch. Classes A-1, A-2, and B have paid in full. The Rating Outlooks reflect the likely direction of any ratings changes over the next one or two years. The upgrades are due to additional paydown of 41 loans (30.6%) since Fitch's last rating action. Two loans, representing 17.1% of the pool remain defeased. As of the November 2008 distribution date, the transaction's aggregate principal balance has paid down 79.6% to $258.5 million from $1.27 billion at issuance. Four loans remain in the pool with 2008 maturities or anticipated repayment dates. The largest loan (49.3%), secured by a retail property in Towson, MD, had an anticipated repayment date in November 2008. The property continues to show improved performance since issuance. The servicer reported mid-year 2008 DSCR is 1.88x and the property is 95% occupied. The sponsor, General Growth Properties, recently indicated to the servicer they do not intend to pay the loan off and will continue paying debt service. The second largest loan (5.8%) with a 2008 maturity date is secured by a parking facility in Atlanta, GA. The borrower was granted a three-month extension to pay off the existing debt, with the new maturity occurring in January 2009. Fitch considers this loan a loan of concern and will continue to monitor the borrower's progress in obtaining financing. The remaining two loans with 2008 maturities (6.9%) are currently being specially serviced. The largest specially serviced loan (4.2%) is secured by a 99,260 square foot (sf) industrial building in Edison, NJ. The property is 100% occupied by Revlon through 2013. The loan became specially serviced after the borrower was unable to complete refinancing. The special servicer is currently working with the borrower to prepare the property for sale. Based on Fitch's preliminary projections of value using the mid-year 2008 servicer reported net operating income and a stressed cap rate, losses are not expected at this time. The remaining specially serviced loan (2.6%) is secured by a 154,375 sf office building in Bingham Farms, MI. The loan transferred to the special servicer in May 2008 due to imminent default as the borrower indicated the loan would not pay off at maturity, July 1, 2008. The property's occupancy has declined as a result of tenant vacancies and a weak market. The borrower continues to market the vacant space at the property. As of November 2008, the property was 42% occupied. Losses are expected. The transaction is concentrated by loan size with the largest loan and top-five largest loans representing 49.3% and 76.5% of the pool, respectively. Additionally, geographic concentrations have increased, with 49.3% of the pool located in MD, 5.8% in GA, and 5.2% in MA. The current ratings reflect these concentrations. CHASE MORTGAGE: Moody's Lowers Ratings on 2006 & 2007 Jumbo Deals ----------------------------------------------------------------- Moody's Investors Service has downgraded 256 tranches and confirmed 4 tranches from 12 Jumbo transactions issued by Chase in 2006 and 2007. The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, prime Jumbo mortgage loans. The actions are triggered by higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to currently available credit enhancement levels. The actions listed reflect Moody's revised expected losses on the Jumbo sector announced in a press release on September 18th, and are part of Moody's on-going review process. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the Aaa waterfalls. General loss estimation methodology is outlined. Complete rating actions are: -- Issuer: Chase Mortgage Finance Trust 2006-S1 Cl. A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-P Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust 2007-S6 Cl. 1-A1 Certificate, Downgraded to A3, previously on 12/7/07 Assigned to Aaa Cl. 1-A2 Certificate, Downgraded to B1, previously on 12/7/07 Assigned to Aa1 Cl. 1-A3 Certificate, Downgraded to Ba3, previously on 12/7/07Assigned to Aaa Cl. 1-AX Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A1 Certificate, Confirmed at Aaa, previously on 12/7/07 Assigned to Aaa Cl. 2-A2 Certificate, Downgraded to Ba3, previously on 12/7/07 Assigned to Aa1 Cl. 2-A3 Certificate, Downgraded to Ba2, previously on 12/7/07 Assigned to Aaa Cl. 2-AX Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-P Certificate, Downgraded to B1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. M Certificate, Downgraded to Caa3, previously on 10/6/08 Aa2 Placed Under Review for Possible Downgrade Cl. B-1 Certificate, Downgraded to Ca, previously on 10/6/08 A2 Placed Under Review for Possible Downgrade Cl. B-2 Certificate, Downgraded to Ca, previously on 10/6/08 Baa2 Placed Under Review for Possible Downgrade Cl. B-3 Certificate, Downgraded to C, previously on 10/6/08 Ba2 Placed Under Review for Possible Downgrade Cl. B-4 Certificate, Downgraded to C, previously on 10/6/08 B2 Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2006-S2 Cl. 1-A1 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A5 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A7 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A8 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A9 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A10 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A11 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A12 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A13 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A14 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A15 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A16 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A17 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A18 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A19 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-AX Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A5 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A7 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A8 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-AX Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-P Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-M Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2006-S3 Cl. 1-A1 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A2 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A3 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A4 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A5 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A6 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A7 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-AX Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A1 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A2 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A3 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-AX Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-P Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-M Certificate, Downgraded to B2, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2006-S4 Cl. A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-15 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-18 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-19 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-20 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-21 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-22 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-23 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-X Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-P Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-M Certificate, Downgraded to B3, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2007-A3 Cl. 1-A1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A2 Certificate, Downgraded to Baa3, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. 1-A3 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A5 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A7 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A8 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A9 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A10 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A11 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A12 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A13 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A14 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A15 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A16 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A17 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A18 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A19 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A20 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A1 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A2 Certificate, Downgraded to Baa3, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. 2-A3 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A4 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A5 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A6 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A7 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A8 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A9 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A10 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A11 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A12 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A13 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A14 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A15 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A16 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A17 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A18 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A19 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A20 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A21 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A22 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A23 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A1 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A2 Certificate, Downgraded to Baa3, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. 3-A3 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A4 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A5 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A6 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A7 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A8 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A9 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A10 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A11 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A12 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A13 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A14 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A15 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A16 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A17 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A18 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A19 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A20 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A21 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. M Certificate, Downgraded to B2, previously on 10/6/08 Aa2 Placed Under Review for Possible Downgrade Cl. B-1 Certificate, Downgraded to Caa1, previously on 10/6/08 A2 Placed Under Review for Possible Downgrade Cl. B-2 Certificate, Downgraded to Caa2, previously on 10/6/08 Baa2 Placed Under Review for Possible Downgrade Cl. B-3 Certificate, Downgraded to Caa3, previously on 10/6/08 Ba2 Placed Under Review for Possible Downgrade Cl. B-4 Certificate, Downgraded to Ca, previously on 10/6/08 B2 Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2007-S1 Cl. A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Aa3, previously on 2/7/07 Assigned to Aaa Cl. A-10 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to Ba2, previously on 2/7/07 Assigned to Aaa Cl. A-12 Certificate, Downgraded to Ba2, previously on 2/7/07 Assigned to Aaa Cl. A-13 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-X Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-P Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-M Certificate, Downgraded to Caa2, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2007-S2 Cl. 1-A1 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A2 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A3 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A4 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A5 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A6 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A7 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A8 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A9 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-AX Certificate, Downgraded to A2, previously on 3/16/07 Assigned to Aaa Cl. 2-A1 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A2 Certificate, Downgraded to Baa2, previously on 3/16/07 Assigned to Aaa Cl. 2-A3 Certificate, Downgraded to Baa3, previously on 3/16/07 Assigned to Aaa Cl. 2-AX Certificate, Downgraded to Baa3, previously on 3/16/07 Assigned to Aaa Cl. A-P Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-M Certificate, Downgraded to Caa2, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2007-S3 Cl. 1-A-1 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-2 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-3 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-5 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-6 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-7 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-8 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-9 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-10 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-11 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-12 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-13 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-14 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-15 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-16 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-17 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. I-A-18 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-19 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. I-A-20 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A-21 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. I-A-22 Certificate, Downgraded to Baa3, previously on 5/11/07 Assigned to Aaa Cl. I-A-23 Certificate, Downgraded to Baa3, previously on 5/11/07 Assigned to Aaa Cl. I-A-24 Certificate, Downgraded to Baa3, previously on 5/11/07 Assigned to Aaa Cl. 1-AX Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A1 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-AX Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-P Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-M Certificate, Downgraded to B2, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. M-1 Certificate, Downgraded to Caa2, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2007-S4 Cl. A-1 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Ba3, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Ba3, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-12 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-15 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-18 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-19 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-X Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. A-P Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2007-S5 Cl. 1-A1 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A2 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A19 Certificate, Downgraded to Baa3, previously on 6/29/07 Assigned to Aaa -- Issuer: Chase Mortgage Finance Trust, Series 2006-A1 Cl. 1-A1 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A2 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A3 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 1-A4 Certificate, Downgraded to Ba1, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. 1-AX Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A1 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 2-A4 Certificate, Downgraded to Ba1, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. 2-AX Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A1 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 3-A2 Certificate, Downgraded to Ba1, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade Cl. 4-A1 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed Under Review for Possible Downgrade Cl. 4-A2 Certificate, Downgraded to Ba1, previously on 10/6/08 Aa1 Placed Under Review for Possible Downgrade -- Issuer: Chase Mortgage Finance Trust Series 2007-A1 Cl. 1-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 1-A6 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 2-A4 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 3-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 4-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 5-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 6-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 7-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 8-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 9-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 10-A2 Certificate, Downgraded to Aa1, previously on 3/16/2007 Assigned to Aaa Cl. 11-A1 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-A2 Certificate, Downgraded to B1, previously on 3/16/2007 Assigned to Aa1 Cl. 11-A3 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-A4 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-A5 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-A6 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-A7 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-A8 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-F1 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-F5 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-F8 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-L1 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-L5 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-L8 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-M1 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-M5 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-M8 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-S1 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-S5 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 11-S8 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 12-A1 Certificate, Downgraded to Aa3, previously on 3/16/2007 Assigned to Aaa Cl. 12-A2 Certificate, Downgraded to A1, previously on 3/16/2007 Assigned to Aaa Cl. 12-A3 Certificate, Downgraded to A1, previously on 3/16/2007 Assigned to Aaa Cl. 12-A4 Certificate, Downgraded to B1, previously on 3/16/2007 Assigned to Aa1 Cl. 12-F3 Certificate, Downgraded to A1, previously on 3/16/2007 Assigned to Aaa Cl. 12-L3 Certificate, Downgraded to A1, previously on 3/16/2007 Assigned to Aaa Cl. 12-M3 Certificate, Downgraded to A1, previously on 3/16/2007 Assigned to Aaa Cl. 12-S3 Certificate, Downgraded to A1, previously on 3/16/2007 Assigned to Aaa Cl. 13-A1 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 13-A2 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 13-A3 Certificate, Downgraded to B2, previously on 3/16/2007 Assigned to Aa1 Cl. 13-F2 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 13-L2 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 13-M2 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Cl. 13-S2 Certificate, Downgraded to A3, previously on 3/16/2007 Assigned to Aaa Moody's calculates estimated losses for Jumbo RMBS in a two-stage process. First, serious delinquencies are projected through late 2009, primarily based upon recent historical performance. These projected delinquencies are converted into projected losses using lifetime roll rates (the probability of transition to default) averaging 40% for 60-day delinquencies, 75% for delinquencies greater than 90 days, and 90-100% for foreclosure or REO, and severity assumptions averaging 35%. The second step is to determine losses for the remaining life of the deal, following the projection period. Depending on a deal's performance, including delinquency, default, and prepayment rates, as well as collateral characteristics, such as loan type (fixed or adjustable), or loan-to-value ratios and geographic concentrations of remaining current loans, Moody's assumes varying degrees of slowing in the loss rate (which is measured by loss-to- liquidation) for the remaining life of the deal. Typical degrees of slowing in loss rate after late 2009 range from no slowing at all to 40% slowing. To take an example, a deal with very poor early performance due to relatively high loan-to-value ratios and dropping regional home values would be expected to see markedly high delinquency and loss rates for the next year. But the high rate of losses may be expected to slow afterwards, as economic factors and real estate values begin to stabilize, and a slowing of 20-40% may be used in the projection. On the other hand, a deal with stronger early performance that is demonstrating relative resiliency in the current market environment may not be expected to have high losses in the near-term, but may be expected to sustain a similar level of losses for the life of the deal, as the pool continues to be subject to factors that have more historically driven prime performance such as borrower life events, unemployment, and so on. Loss estimates are subject to variability and, as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly if necessary. CHASEFLEX TRUST: S&P Lowers Ratings on 25 Classes of Certificates ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 25 classes of mortgage pass-through certificates from ChaseFlex Trust Series 2005-2, a residential mortgage-backed securities (RMBS) transaction backed by U.S. prime jumbo mortgage loan collateral. According to S&P: "The downgrades reflect our opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings, given our current projected losses. As of the Nov. 25, 2008, distribution, total and severe delinquencies (as a percentage of the current mortgage pool balance) and cumulative realized losses (as a percentage of the original mortgage pool balance) were: Total Severe Cumulative delinquencies delinquencies realized losses ------------- ------------- --------------- 9.11% 5.16% 0.15% "Our lifetime projected losses, as a percentage of the original mortgage pool balance, for this U.S. RMBS transaction are 1.88%. The remaining projected lifetime losses and the current credit support for the senior classes, as a percentage of the current mortgage pool balance, as well as the multiple of current credit support (CCS) to the remaining projected lifetime losses (RPL), are: Remaining Current Multiple projected losses credit support CCS/RPL ---------------- -------------- -------- 3.22% 8.83% 2.746 "Because the senior classes had a multiple of current credit support to the remaining projected lifetime losses that was under 3.0 but at least 2.5, we lowered our ratings on these classes to 'A'. "Subordination provides credit support for this transaction. The underlying collateral for this deal consists of four pools of fixed-rate U.S. prime jumbo mortgage loans. The loans are secured primarily by first liens on one- to four-family residential properties with original terms to maturity (from the first scheduled payment due date) of no more than 30 years. "Standard & Poor's will continue to monitor the RMBS transactions it rates and take rating actions, including CreditWatch placements, when appropriate." RATINGS LOWERED ChaseFlex Trust Series 2005-2 Rating Class CUSIP To From ----- ----- -- ---- 1-A1 16165TAX1 A AAA 1-A2 16165TAY9 A AAA 2-A1 16165TAZ6 A AAA 2-A2 16165TBA0 A AAA 3-A1 16165TBB8 A AAA 3-A2 16165TBC6 A AAA 3-A3 16165TBD4 A AAA 3-A4 16165TBE2 A AAA 4-A1 16165TBF9 A AAA 4-A2 16165TBG7 A AAA 4-A3 16165TBH5 A AAA 5-A1 16165TBJ1 A AAA 5-A3 16165TBL6 A AAA 5-A4 16165TBM4 A AAA 5-A5 16165TBN2 A AAA 5-A6 16165TBP7 A AAA 5-A7 16165TBQ5 A AAA 5-A8 16165TBR3 A AAA A-P 16165TBT9 A AAA A-X 16165TBS1 A AAA M 16165TBV4 BB AA B-1 16165TBW2 B A B-2 16165TBX0 CCC BBB B-3 16165TBY8 CCC BB B-4 16165TBZ5 CC CCC CHECKSMART FINANCIAL: Moody's Confirms Junk Ratings; Outlook Neg. ----------------------------------------------------------------- Moody's Investors Service confirmed the Corporate Family rating of Caa2, the senior secured first lien term loan and first lien revolving credit facility rating of Caa2, and the senior secured second lien term loan rating of Ca for Checksmart Financial Company. The rating outlook is negative. The rating action reflects Moody's view that Ohio House Bill 545, which is expected to become effective by 12/31/08, will likely have a material effect on Checksmart's revenues, earnings, cash flows, and financial condition, including its longer-term ability to service the debt taken on in the company's 2006 leveraged buyout transaction. However, given the company's current cash resources and anticipated cash flow, Moody's believes a near-term payment default is unlikely, and therefore the ratings were confirmed. The legislation substantially alters the payday lending business in Ohio by capping the annual interest rate, lowering the maximum amount of a loan, extending the minimum life of a loan, capping the number of loans a consumer could obtain per year, and mandating that consumers who take more than three payday loans in a period of 90 days attend a financial literacy program. As a result of this legislation, Checksmart may be forced to close or materially revamp the business plan of its 98 stores in Ohio, the company's home state. (Checksmart has 253 total stores in 11 states in the US.) The negative outlook reflects the uncertainty related to the company's ability to alter its business and financial plan in Ohio in response to House Bill 545. These ratings were confirmed with a negative outlook: * Corporate Family Rating -- at Caa2 * Senior Secured First Lien Revolving Credit Facility -- at Caa2 * Senior Secured First Lien Term Loan -- at Caa2 * Senior Secured Second Lien Term Loan -- at Ca The last rating action on Checksmart was on June 4, 2008, when Moody's downgraded the ratings and left the ratings under review for possible downgrade. Based in Dublin, Ohio, Checksmart is a provider of payday lending loans and offers check cashing services and other financial products. The company operates 256 stores in eleven states. CHESAPEAKE CORP: Hires Hunton & Williams to Advise on Bankruptcy ---------------------------------------------------------------- Bloomberg News' Tiffany Kary reports that Chesapeake Corp. has hired Hunton & Williams as legal counsel to explore a bankruptcy, a person familiar with the situation said. According to Bloomberg, Joe Vagi, a spokesman for Chesapeake, said he couldn't comment. The report also notes that Eleanor Kerlow, a spokeswoman for Richmond-based Hunton & Williams, didn't immediately return a call for comment. Alvarez & Marsal, the restructuring adviser hired in August, can't comment on whether Chesapeake is close to seeking bankruptcy, spokeswoman Rebecca Baker said, the report says. On December 11, 2008, Chesapeake said it signed an amendment and extension of the forbearance agreement with the required lenders under its $250-million Senior Secured Credit Facility. Under the agreement, the lenders agreed that they will forbear from exercising their rights and remedies against the company and its subsidiaries in respect of (i) existing financial condition covenant defaults and (ii) the company's failure to pay the interest payment that was due on November 15, 2008, to the holders of its 10-3/8% Senior Subordinated Notes under the Senior Secured Credit Facility until December 23, 2008, subject to the terms and conditions of the forbearance agreement. Chesapeake entered into the forbearance agreement in November. The initial period of the lenders' forbearance continued until December 10, 2008. At that time, Andrew J. Kohut, Chesapeake president and chief executive officer, said the company was engaged in discussions with other parties-in-interest on possible alternative financial restructuring opportunities. The company had earlier disclosed that it was in negotiations with an ad hoc committee of holders of its subordinated debt. On October 1, 2008, the holders of more than 70% of the principal amount of the company's outstanding 10-3/8% Sterling-denominated senior subordinated notes due in 2011 and 7% euro-denominated senior subordinated notes due in 2014 had formed an ad hoc committee and retained a third party financial advisor. According to Mr. Kohut, the December 26 extension "provides us additional time to finalize arrangements for the short- and long- term financial liquidity and financial restructuring we need." Mr. Kohut also said, "We continue to make good progress on our restructuring plans with our lenders and with a group of holders of our subordinated debt." The agreement of the lenders is subject to compliance by the company and the other Chesapeake subsidiary borrowers under the Senior Credit Facility with the terms and conditions set forth in the forbearance agreement. In addition, the lenders have reserved the right to terminate the forbearance agreement immediately in the event that the Subordinated Note Holders accelerate payment of the 10-3/8% Senior Subordinated Notes and pursue any remedy against Chesapeake on account of any payment default related thereto. The company expects to be able to comply with the requirements of the forbearance agreement, but if it is not able to do so, or the forbearance agreement terminates, the lenders under the Senior Secured Credit Facility could require immediate payment of all amounts outstanding under the Senior Secured Credit Facility, terminate their commitments to lend under the Senior Secured Credit Facility and, pursuant to cross-default provisions in many of the instruments that govern other outstanding indebtedness of the company, immediate payment of other outstanding indebtedness could be required, all of which would have a material adverse effect on the business, results of operations and financial condition of the company and would raise substantial doubts about its ability to continue as a going concern. Chesapeake Corporation protects and promotes the world's great brands as a leading international supplier of value-added specialty paperboard and plastic packaging. Headquartered in Richmond, Va., the company is one of Europe's premier suppliers of folding cartons, leaflets and labels, as well as plastic packaging for niche markets. Chesapeake has 44 locations in Europe, North America, Africa and Asia and employs approximately 5,400 people worldwide. As of September 30, 2008, Chesapeake's consolidated balance sheets showed $936.4 million in total assets, including $340.7 million in current assets; and $937.1 million in total liabilities, including $469.2 million in current liabilities, resulting in $500,000 in stockholders' deficit. CHESAPEAKE CORP: S&P's Rating on 7% Senior Notes Tumbles to 'D' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its issue-level ratings on Chesapeake Corp.'s 7% euro-denominated senior subordinated notes due 2014 and industrial revenue bonds due 2019 to 'D' from 'CC'. According to S&P: "The ratings action stems from our assessment that Chesapeake's ability to service its interest payment obligations under these debt instruments, including the Dec. 15, 2008, coupon payment on the euro-denominated notes, was likely blocked by the secured lenders on Chesapeake's $250 million revolving credit facility. This is due to the company's distressed financial situation, which was caused by deteriorating cash flow and high leverage. A payment default has not occurred relative to the legal provisions of the notes. However, we consider a default to have occurred when a payment related to an obligation is not made, even if a grace period exists, if the nonpayment is a function of the borrower being under financial stress -- unless we are confident that the payment will be made in full during the grace period. "Chesapeake recently announced the extension of the forbearance agreement with lenders under its revolving credit facility to Dec. 23, 2008, under which the lenders have agreed to forbear from exercising their rights and remedies against the company in respect to existing financial covenant defaults and the company's failure to pay the interest payment on the sterling-denominated subordinated notes. "Chesapeake continues to review financial and strategic alternatives, which can include a recapitalization, refinancing, restructuring, or reorganization of its obligations." CHRYSLER LLC: Moody's Says Likely Scenario Is Government Support ---------------------------------------------------------------- The U.S. Government will likely provide immediate stopgap financing to bridge the major American auto companies until a more complete agreement can be reached early in 2009, says Moody's Investors Service in a new report that outlines the three mostly likely bailout and bankruptcy scenarios for government help to Ford, GM and Chrysler. "We think it's most likely that a prepackaged bankruptcy filing coupled with government financial assistance will be needed to restructure the Big Three," said Moody's Senior Vice President Bruce Clark, a co-author of the report. "The government will also probably offer support by providing or guaranteeing debtor-in- possession or DIP financing, and bondholder losses would probably be less than 75% in this scenario." In the wake of the domestic auto manufacturing companies' request for urgent financial assistance from the federal government, the Moody's report describes three bailout and bankruptcy scenarios for Detroit, assesses the probabilities of these scenarios, and examines the extent of likely losses in each of the scenarios for auto manufacturer debt holders. It then assesses the broader implications of the three scenarios, across the larger economy generally and specifically on 10 important financial and industrial sectors. These include auto-part manufacturers, captive finance companies, car rental companies, banks, auto dealers, steel, chemicals, rental car fleet securitizations, state and local governments, dealer floorplan securitizations, auto loan/lease securitizations, and rental car fleet securitizations. "A prepackaged bankruptcy might be the best approach to current problems, but achieving timely agreement from a broad range of creditors would be highly difficult, especially given the critical funding status of GM and Chrysler," said Mr. Clark. While the analyst and his Moody's colleagues give a prepackaged bankruptcy filing coupled with government financial assistance a 70% likelihood of coming to pass, they assign a 25% probability of a government bailout without a near-term automaker bankruptcy. "Under this less-likely scenario, a comprehensive bailout package is agreed to that enables the automakers to restructure without any bankruptcy filings during 2009. The degree of economic disruption and direct financial loss for investors would be contained, at least in the short term," said Mr. Clark. "Bondholder losses would be the least in this scenario, although there is a risk that such a reorganization would be inadequate, and that at least one automaker might file for bankruptcy beyond 2009." Given only a 5% likelihood, Moody's also considers the "freefall bankruptcy" scenario without a prepackage plan and without government involvement. This would involve the most significant disruption to the economy, including potential bankruptcies in associated industries such as auto parts suppliers and auto dealers. "The negative consumer sentiment and erosion of franchise value would make the reorganization process more complex for the automakers and a Chapter 7 liquidation of at least one of the automakers possible," said Clark. "Auto bondholder losses could be in the 75-100% range in this scenario." The report, "U.S. Automakers: Credit Implications of Three Scenarios Have Broad Reach," is available at: http://www/moodys.com/ CHRYSLER LLC: To Shut for a Month; Cerberus Won't Put More Funds ---------------------------------------------------------------- Lauren Pollock and Neal E. Boudette at The Wall Street Journal report that Chrysler LLC will close its manufacturing operations on Dec. 19, for at least a month. Work will resume on Jan. 19, WSJ states, citing Chrysler. According to WSJ, Chrysler is trying to align production and inventory with U.S. market demand, pointing to tight consumer credit conditions that lead to dealers losing 20% to 25% of their sales volume. Temporary Halt on Loans for Dealers WSJ relates that Chrysler Financial said that it may have to temporarily stop loans that dealers use to purchase new cars. A wave of withdrawals from a fund used to pay off those loans led Chrysler to consider stopping the loans, says the report. Chrysler Financial's Vice Chairperson and CEO Thomas Gilman, according to WSJ, said in a letter dated Dec. 12 that dealers have been withdrawing up to $60 million from the fund daily. Reminding dealers that Cash Management Account funds lessen their wholesale outstandings, Mr. Gilman said in the letter that on Dec. 1, he informed dealers of changes in their fourth quarter dealer rewards program and the extension of their 2% CMA bonus through June 30, 2009, and said that since then, there has been an unusual and unprecedented re-advance on CMA. Mr. Gilman stated that "the net effect of a re-advancement is a decrease in our wholesale capacity, which directly impedes our ability to provide funding for additional wholesale outstandings. Daily re-advance requests are approaching $60 million, well above our historical daily advances. Since July, we've made CMA re-advancements of over a billion and a half dollars. These re-advancements have been funded using our liquidity and have provided dealers with the opportunity to use CMA as a normal course." The daily rate of withdrawals has constrained wholesale and that continued significant levels of withdrawals from CMA could force Chrysler Financial to suspend wholesale funding, WSJ reports, citing Mr. Gilman. Mr. Gilman, according to WSJ, asked dealers not to re-advance CMA funds beyond what is necessary for the operation of their businesses, maintain current balance, or increase their participation to take full advantage of the 2% CMA bonus that runs through June 30, 2009. The dealers explained that they began withdrawing money from CMA due to fears on Chrysler's possible bankruptcy, WSJ relates. Greg Bensinger and Mike Ramsey at Bloomberg News quoted Chrysler Financial spokesperson Amber Gowen as saying, "Chrysler Financial finances 75% of all vehicles shipped to U.S. dealers and will continue to support our dealer body with uninterrupted wholesale financing." Chrysler Financial has been discussing with the U.S. Treasury Department and the office overseeing the Troubled Asset Relief Program on how to help "break the logjam" in the market for asset- backed securities like car loans, and that may help the company "in the form of liquidity to fund wholesale and retail loans," Bloomberg states, citing Mr. Gilman. Cerberus Explains Detachment in Chrysler's Financial Problem Heidi N. Moore posted at WSJ's Deal Journal that Sen. Bob Corker and Rep. Ginny Brown-Wait questioned helping out Chrysler while parent Cerberus Capital Management refuses to step in to help prop up the financially troubled company. Citing a person familiar with the matter, Deal Journal relates that Cerberus Capital officials said that the company has limited partners that include stakeholders: -- pension funds, -- retirees, and -- endowments. "No one is asking General Motors and Ford to pour their money in, and Cerberus has the same shareholders as they do -- retirees, pension plans and endowments," Deal Journal quoted the Cerberus Capital officials as saying. According to Deal Journal, Cerberus Capital has invested all it is allowed to in Chrysler. The $27 billion that Cerberus Capital manages, Deal Journal says, isn't cash on hand. The report states that Cerberus Capital said it can't put more than 5% of its assets into any one investment. Cerberus would have to ask permission from its limited partners if it wants to inject more money into Chrysler, and chances are slim that the partners would agree to invest-and potentially lose money on an auto maker so close to bankruptcy that it has hired bankruptcy advisers, Deal Journal relates. About Chrysler LLC Headquartered in Auburn Hills, Michigan, Chrysler LLC -- http://www.chrysler.com/-- a unit of Cerberus Capital Management LP, produces Chrysler, Jeep(R), Dodge and Mopar(R) brand vehicles and products. The company has dealers worldwide, including Canada, Mexico, U.S., Germany, France, U.K., Argentina, Brazil, Venezuela, China, Japan and Australia. * * * As reported in the Troubled Company Reporter on Dec. 3, 2008, Dominion Bond Rating Service downgraded the ratings of Chrysler LLC, including Chrysler's Issuer Rating to CC from CCC (high). Chrysler's First Lien Secured Credit Facility and Second Lien Secured Credit Facility have also been downgraded to CCC and CC (low) respectively. All trends are Negative. The ratings action reflects Chrysler's challenge to maintain sufficient liquidity balances amid severe industry conditions that have deteriorated alarmingly over the past few months and are not expected to improve in the near term. With this ratings action, Chrysler is removed from Under Review with Negative Implications, where it was placed on Nov. 7, 2008. As reported in the Troubled Company Reporter on Aug. 11, 2008, Standard & Poor's Ratings Services lowered its ratings on Chrysler LLC, including the corporate credit rating, to 'CCC+' from 'B-'. On July 31, 2008, TCR said that Fitch Ratings downgraded the Issuer Default Rating of Chrysler LLC to 'CCC' from 'B-'. The Rating Outlook is Negative. The downgrade reflects Chrysler's restricted access to economic retail financing for its vehicles, which is expected to result in a further step-down in retail volumes. Lack of competitive financing is also expected to result in more costly subvention payments and other forms of sales incentives. Fitch is also concerned with the state of the securitization market and the ability of the automakers to access this market on an economic basis over the near term, given the steep drop in residual values, higher default rates, higher loss severity being experienced and jittery capital market. As reported in the TCR on Dec. 3, 2008, Dominion Bond Rating Service downgraded on Nov. 20, 2008, the ratings of Chrysler LLC, including Chrysler's Issuer Rating to CC from CCC (high). Chrysler's First Lien Secured Credit Facility and Second Lien Secured Credit Facility have also been downgraded to CCC and CC (low) respectively. All trends are Negative. The ratings action reflects Chrysler's challenge to maintain sufficient liquidity balances amid severe industry conditions that have deteriorated alarmingly over the past few months and are not expected to improve in the near term. With this ratings action, Chrysler is removed from Under Review with Negative Implications, where it was placed on Nov. 7, 2008. CIRCUIT CITY: Court OKs Hilco/Gordon as Agents for GOB Sales ------------------------------------------------------------ According to Bloomberg News' Bill Rochelle, Circuit City Stores Inc., won final approval from the U.S. Bankruptcy for the Eastern District of Virginia to continue the employment of Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC as agents to conduct going-out-of-business sales at the 154 stores that the company began closing before the Nov. 10 Chapter 11 filing. The Debtors sought and obtained the Court's authority to assume a store closing agreement dated November 4, 2008, between: * Circuit City Stores, Inc., Circuit City Stores West Coast, Inc., and Circuit City's other direct and indirect United States subsidiaries; and * agent Hilco Merchant Resources, LLC, and Gordon Brothers Retail Partners, LLC. Prior to their bankruptcy filing, the Debtors undertook efforts to cut costs, streamline operations, and increase profitability, and has determined to close certain underperforming or unprofitable retail stores. On November 5, 2008, the Agent officially began store closing sales at 154 locations pursuant to the Store Closing Agreement. For the Debtors to conclude the Store Closing Sales as quickly and efficiently as possible, and thereby minimize any unnecessary administrative expenses, it is essential that they be permitted to continue performing pursuant to the Store Closing Agreement, including making all required payments, says Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, in Wilmington, Delaware, the Debtors' proposed counsel. He notes that failure to do so at this point would in all likelihood lead only to unnecessary delay and expense that would in turn disrupt the Debtors' restructuring efforts. Mr. Galardi avers that the Agent has overseen the Store Closing Sales and best knows how to maximize the value to be obtained by the Debtors' bankruptcy estates during the remainder of the sales. Hence, he notes, locating alternate agents would be extremely difficult because the Debtors already gave the other major inventory liquidation firms an opportunity to submit competing bids, and the firms declined. Mr. Galardi points out that because the Store Closing Sales are scheduled to conclude within the next four to five weeks, it is unlikely that any agents could even be found at this stage of the store closings, or undertake to continue the store closings on an uninterrupted basis. To enable the Debtors to obtain the best possible debtor-in-possession financing terms, he tells the Court, assumption of the Store Closing Agreement is warranted. About Circuit City Stores, Inc. Headquartered in Richmond, Virginia, Circuit City Stores Inc. (NYSE: CC) -- http://www.circuitcity.com/-- is a specialty retailer of consumer electronics, home office products, entertainment software and related services. The company has two segments: domestic and international. Circuit City Stores, Inc. (NYSE: CC) together with 17 affiliates filed a voluntary petition for reorganization relief under Chapter 11 of the Bankruptcy Code on November 10 (E.D. Virg. Lead Case No.: 08-35653). InterTAN Canada, Ltd., which runs Circuit City's Canadian operations, also sought protection under the Companies' Creditors Arrangement Act in Canada. Gregg M. Galardi, Esq., and Ian S. Fredericks, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, are the Debtors' general restructuring counsel. Dion W. Hayes, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, are the Debtors' local counsel. The Debtors also tapped Kirkland & Ellis LLP as special financing counsel; Wilmer, Cutler, Pickering, Hale and Dorr, LLP, as special securities counsel; and FTI Consulting, Inc. and Rotschild Inc. as financial advisors. The Debtors' Canadian general restructuring counsel is Osler, Hoskin & Harcourt LLP. Kurtzman Carson Consultants LLC is the Debtors' claims and voting agent. The Debtors disclosed total assets of $3,400,080,000 and debts of $2,323,328,000 as of Aug. 31, 2008. (Circuit City Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CIRCUIT CITY: Seeks to Keep Credit Card Deal w/ Chase Bank ---------------------------------------------------------- Circuit City Stores Inc., reached an agreement with credit-card issuer Chase Bank USA N.A. that permits continuation of its private-label and co-branded credit-card program, Bloomberg News reports. According to Bloomberg's Bill Rochelle, the settlement allows Chase to set aside a $15 million reserve to cover chargebacks by credit-card holders. Chase, according to the report, will be allowed to make chargebacks regardless of whether they relate to purchases before or after the Chapter 11 filing. The Court will consider approval of the settlement on Dec. 22 About Circuit City Stores, Inc. Headquartered in Richmond, Virginia, Circuit City Stores Inc. (NYSE: CC) -- http://www.circuitcity.com/-- is a specialty retailer of consumer electronics, home office products, entertainment software and related services. The company has two segments: domestic and international. Circuit City Stores, Inc. (NYSE: CC) together with 17 affiliates filed a voluntary petition for reorganization relief under Chapter 11 of the Bankruptcy Code on November 10 (E.D. Virg. Lead Case No.: 08-35653). InterTAN Canada, Ltd., which runs Circuit City's Canadian operations, also sought protection under the Companies' Creditors Arrangement Act in Canada. Gregg M. Galardi, Esq., and Ian S. Fredericks, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, are the Debtors' general restructuring counsel. Dion W. Hayes, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, are the Debtors' local counsel. The Debtors also tapped Kirkland & Ellis LLP as special financing counsel; Wilmer, Cutler, Pickering, Hale and Dorr, LLP, as special securities counsel; and FTI Consulting, Inc. and Rotschild Inc. as financial advisors. The Debtors' Canadian general restructuring counsel is Osler, Hoskin & Harcourt LLP. Kurtzman Carson Consultants LLC is the Debtors' claims and voting agent. The Debtors disclosed total assets of $3,400,080,000 and debts of $2,323,328,000 as of Aug. 31, 2008. CITIGROUP MORTGAGE: S&P Cuts Ratings on 4 Cert. Classes to Low-B ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 10 classes of resecuritized real estate mortgage investment conduit (re-REMIC) trust certificates from Citigroup Mortgage Loan Trust 2007-9. "We also affirmed our 'AAA' rating on class III-A-8 from the same transaction," S&P said. "This re-REMIC transaction has three separate and distinct structure groups; however, we rated classes from only two of them. The affected classes have a current balance of approximately $118.93 million, compared with an original total principal balance of approximately $128.24 million at issuance. "The downgrades reflect our belief that these classes may no longer have sufficient credit enhancement within the underlying deal structure to support the ratings at their previous levels. Our belief is based on our projected lifetime losses on the underlying transactions, which we derived from a loss curve that utilizes the dollar amount of loans currently in the delinquency pipelines of the underlying deals. "The 'AAA' rating affirmation reflects our belief that this class has adequate credit support at this rating level from subordinate classes within the re-REMIC structure to protect it from projected losses to the underlying classes." Structure II is a resecuritization of two certificates from Citigroup Mortgage Loan Trust 2007-6. Structure III is a resecuritization of two certificates from Wells Fargo Alternative Loan 2007-PA2 Trust. Certain combinations of classes III-A-4 through III-A-9 in structure III may be issued through an exchange of class III-A-1. The collateral for the underlying deals consists of U.S. residential Alternative-A, fixed-rate, first-lien mortgage loans. Subordination is the sole means of credit support in the underlying transactions. RATINGS LOWERED Citigroup Mortgage Loan Trust 2007-9 Re-REMIC trust certificates Rating Class To From ----- -- ---- II-A-1 BB- AAA II-A-2 B+ AAA II-A-3 B+ AAA III-A-1 A- AAA III-A-3 B AAA III-A-4 A- AAA III-A-5 A- AAA III-A-6 A- AAA III-A-7 A- AAA III-A-9 A- AAA RATING AFFIRMED Citigroup Mortgage Loan Trust 2007-9 Re-REMIC trust certificates Class Rating ----- ------ III-A-8 AAA CONTINENTAL AIRLINES: Fitch Affirms Sr. Debt Rating at 'CCC/RR6' ---------------------------------------------------------------- Fitch Ratings has affirmed the debt ratings of Continental Airlines, Inc. (NYSE: CAL): -- Issuer Default Rating (IDR) at 'B-'; -- Senior Unsecured Debt at 'CCC/RR6'. The Rating Outlook for CAL is Stable. Ratings for CAL reflect the airline's high lease-adjusted leverage, weak and volatile cash flow, as well as the airline industry's ongoing vulnerability to air travel demand and fuel price shocks. The Stable Outlook captures the fact that the dramatic pull-back in jet fuel prices since mid-summer has put CAL in a position to deliver somewhat better free cash flow generation in 2009. This should allow the carrier to maintain liquidity at or above current levels while meeting significant fixed financing obligations. Unrestricted cash balances, while pressured as a result of weak operating cash flow in 2008, remain adequate in light of the high degree of revenue uncertainty that CAL and its principal airline competitors face as they operate in a period of extreme macroeconomic stress and credit market tightness. CAL is positioned to benefit from the collapse in crude oil and jet fuel prices that has occurred over the last five months, setting aside the near-term liquidity pressures tied to the posting of cash collateral with fuel hedge counterparties. Fitch estimates that full-year 2009 cash savings of over $1.5 billion could result from a decline in average jet fuel prices to between $2.00 and $2.25 per gallon in 2009. While modest hedges for early 2009 fuel consumption remain in place, most under-water derivative positions will have expired by next summer. This should allow CAL to participate in the upside of significantly lower fuel prices during a period of soft global energy demand. The big question for CAL and the entire U.S. industry now is the degree to which lower fuel costs will offset an anticipated decline in global air travel demand, passenger yields and revenue per available seat mile (RASM) as the world falls deeper into recession. Some of the typical cyclical pressure on unit revenue has been mitigated by the capacity rationalization undertaken by CAL in late summer -- a step that resulted from the unsustainable fuel cost pressure being felt until mid-year. The pull-down of domestic scheduled capacity (approximately 11% in the fourth quarter) has given CAL and the other big U.S. airlines a head- start in adapting to a recessionary demand environment. Nevertheless, Fitch will remain focused on monthly RASM trends through much of 2009 as the full impact of the economic downturn on both business and leisure travel demand becomes more clear. Management has indicated recently that it is prepared to take further decisive action on capacity if demand weakness intensifies. CAL has already taken steps to supplement narrowbody aircraft retirements by pushing out some Boeing aircraft deliveries previously planned for 2009. The carrier now expects to take 14 Boeing B737NG deliveries next year, and backstop financing commitments for those aircraft are in place. CAL's cash obligations for 2009 are manageable in comparison to forecasted year-end 2008 unrestricted liquidity of $2.6 billion. Scheduled debt maturities in 2009 total $488 million, and CAL now expects to make the minimum cash pension funding requirement of approximately $110 million next year. This estimate incorporates the likely impact of substantial declines in pension plan asset values at Dec. 31, 2008, resulting from the financial market collapse. Given the maturity and pension funding profile for 2009, the need for incremental access to debt capital markets (beyond the committed aircraft financing) appears limited. However, looking ahead to 2010 and 2011, heavy scheduled debt maturities will likely force CAL to access the credit markets if unrestricted cash balances are to be maintained above critical levels (in the $1.5 billion to $2 billion range). Scheduled debt maturities for 2010 total $921 million, and $1.1 billion in debt comes due in 2011. An easing of credit market tightness over the next few quarters therefore seems necessary if CAL is to avoid the need to push aircraft capital commitments out further beyond 2009. A revision in the Rating Outlook to Negative or a downgrade could follow in 2009 if a precipitous decline in air travel demand drives passenger unit revenue comparisons substantially negative (5%-10% declines in year-over-year RASM). Alternatively, negative actions could result from another spike in jet fuel prices to $3.00 per gallon or higher. Fitch regards this scenario as unlikely now given the state of the global economy and weak world energy demand. CREDIT SUISSE: Moody's Junks Ratings on 3 Classes of Certificates ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings of seven classes and affirmed 17 classes of Credit Suisse Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2007- C2: -- Class A-1, $20,130,679, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class A-2, $318,000,000, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class A-AB, $64,298,000, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class A-3, $368,000,000, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class A-1A, $1,531,703,851, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class A-M, $229,773,000, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class A-MFL, $100,000,000, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class A-J, $272,064,000, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class A-X, Notional, affirmed at Aaa; previously assigned Aaa on 5/29/07 -- Class B, $16,489,000, affirmed at Aa1; previously assigned Aa1 on 5/29/07 -- Class C, $53,588,000, affirmed at Aa2; previously assigned Aa2 on 5/29/07 -- Class D, $28,855,000, affirmed at Aa3; previously assigned Aa3 on 5/29/07 -- Class E, $16,489,000, affirmed at A1; previously assigned A1 on 5/29/07 -- Class F, $28,855,000, affirmed at A2; previously assigned A2 on 5/29/07 -- Class G, $28,855,000, affirmed at A3; previously assigned A3 on 5/29/07 -- Class H, $45,344,000, affirmed at Baa1; previously assigned Baa1 on 5/29/07 -- Class J, $37,100,000, affirmed at Baa2; previously assigned Baa2 on 5/29/07 -- Class K, $32,977,000, downgraded to Ba1 from Baa3; previously assigned Baa3 on 5/29/07 -- Class L, $8,244,000, downgraded to Ba3 from Ba1; previously assigned Ba1 on 5/29/07 -- Class M, $8,245,000, downgraded to B1 from Ba2; previously assigned Ba2 on 5/29/07 -- Class N, $16,488,000, downgraded to B2 from Ba3; previously assigned Ba3 on 5/29/07 -- Class O, $4,123,000, downgraded to Caa1 from B1; previously assigned B1 on 5/29/07 -- Class P, $12,366,000, downgraded to Caa2 from B2; previously assigned B2 on 5/29/07 -- Class Q, $8,244,000, downgraded to Caa3 from B3; previously assigned B3 on 5/29/07 Moody's downgraded Classes K, L, M, N, O, P and Q due to the overall decline in pool performance and increased dispersion of loan credit quality. Moody's weighted average loan to value ratio is 121% compared to 113% at securitization. Approximately 59% of the pool has a LTV in excess of 120% compared to 27% at securitization. As of the November 18, 2008 distribution date, the transaction's aggregate certificate balance has decreased by less than 1% to $3.29 billion from $3.30 billion at securitization. The Certificates are collateralized by 213 mortgage loans ranging in size from less than 1% to 14% of the pool, with the top 10 loans representing 45% of the pool. The pool has not experienced any losses since securitization. The pool's sixth largest loan, representing 2.8% of the pool ($93 million), is currently in special servicing. The loan is the Alliance SAFD-HC4 Loan, secured by 10 multifamily properties located in Texas (9) and Florida (1). The loan was transferred to special servicing in October 2008 due to imminent default. The portfolio occupancy was 81% as of September 2008 compared to 86% at securitization. Moody's LTV is 161% compared to 115% at securitization. Thirty-three loans, representing 24% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Moody's was provided with partial and full-year year 2007 and partial-year 2008 operating results for 91% and 77% of the pool, respectively. The three largest loans represent 23% of the pool. The largest loan is the Alliance SAFD-PJ Portfolio Loan ($475 million -- 14%), which is secured by 32 Class B multifamily properties located in Texas, Arizona, Florida, Georgia and Tennessee. The portfolio was 89% occupied as of June 2008, the same as at securitization. Performance has been adversely impacted by increased operating expenses. The loan is interest only for the entire 10-year term. Moody's LTV is 126% compared to 118% at securitization. The second largest loan is the 599 Lexington Avenue Loan ($475 million -- 5%), which is secured by a 1.0 million square foot Class A office building located in midtown Manhattan. The property was 100% leased as of June 2008, the same as at securitization. The loan is interest only for the entire 10-year term. Moody's LTV is 122%, the same as at securitization. The third largest loan is the Three and Four Westlake Park Loan ($146 million -- 4%), which is secured by two Class A office properties totaling 976,000 square feet, located in Houston, Texas. The properties were 100% leased as of September 2008, the same as at securitization. Approximately 90% of the property is leased to energy companies. The loan is interest only for its entire five-year term. Moody's LTV is 118%, the same as at securitization. DEL FRISCO'S: S&P Affirms 'B' Credit Rating; Outlook Negative ------------------------------------------------------------- Standard & Poor's Ratings Services revised the outlook on Del Frisco's Restaurant Group LLC to negative from stable. "At the same time, we affirmed the 'B' corporate credit rating on the company," S&P said. "The outlook revision reflects that very poor economic conditions have and will continue to hurt sales at the company's existing restaurants," said Standard & Poor's credit analyst Charles Pinson-Rose, "which will stunt the firm's profitability growth and credit metric improvement." Consequently, Del Frisco's may have a difficult time complying with financial covenants of its senior secured credit facility as they become more restrictive and could have a problem doing so at the end of 2009 or early 2010. DELPHI CORP: Chairman Says Detroit 3 Need Pseudo-Bankruptcy ----------------------------------------------------------- "General Motors Corp., Chrysler LLC, and Ford Motor Company - need an out-of-court pseudo-bankruptcy that mimics the things that might happen in a bankruptcy," said Steve Miller, Delphi Corp. chairman, in an interview with Automotive News. Mr. Miller, however, believed that bankruptcy and prepackaged bankruptcy, which served as turnaround tools for Delphi, may not be suitable to the Detroit 3. "The Bankruptcy system isn't built to handle anything as "big, complex and politically sensitive" as a GM Bankruptcy," he related in the Automotive News interview. "Prepackaged bankruptcies don't save time because all concessions need to be made before going to the Court and the situation where GM and Chrysler are in calls for urgency," Mr. Miller stressed. Back in 1979, he recalled, it took three months of debate before Congress signed the bill on loan guarantees on December 21, 1979, and another six more months for Chrysler to get all stakeholder concessions required by the law before an automaker could draw its first guaranteed loan. The article implied that a March 31 deadline for the Detroit 3 to line-up concessions from stakeholders may prove to be overly optimistic. In 1979, there was Chrysler, one company who needed cash, this time, there are three companies with different problems, Mr. Miller pointed out in the interview. Though a bailout is about saving jobs, excessive focus on creating jobs would be bad as in effect, "that would be creating a Job Banks again," he added in the Automotive interview. Mr. Miller also cited that an auto czar, instead of micromanaging the companies, should establish guiding principles and leave the rest to the management. "They should just make the companies healthy and let the market do the rest," he concluded in the interview. Mr. Miller was responsible for the 1979 rescue of Chrysler Corp. and has rehabilitated several troubled companies, the article noted. To recall, the U.S. Senate has rejected the proposed $14 billion financial assistance for General Motors, Chrysler, and Ford Motor, after the measure was passed by the House of Representatives. In light of the Senate's decision, the White House, according to the Wall Street Journal, said on Friday that it would consider letting the Big 3 access the $700 billion financial-rescue plan. The government's $700 billion Troubled Asset Relief Program was approved in October and was intended for financial institutions. About Delphi Corp. Based in Troy, Michigan, Delphi Corporation (PINKSHEETS: DPHIQ) -- http://www.delphi.com/-- is the single supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology. The company's technology and products are present in more than 75 million vehicles on the road worldwide. Delphi has regional headquarters in Japan, Brazil and France. The company filed for Chapter 11 protection on Oct. 8, 2005 (Bankr. S.D.N.Y. Lead Case No. 05-44481). John Wm. Butler Jr., Esq., John K. Lyons, Esq., and Ron E. Meisler, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, represent the Debtors in their restructuring efforts. Robert J. Rosenberg, Esq., Mitchell A. Seider, Esq., and Mark A. Broude, Esq., at Latham & Watkins LLP, represent the Official Committee of Unsecured Creditors. As of June 30, 2008, the Debtors' balance sheet showed US$9,162,000,000 in total assets and US$23,742,000,000 in total debts. The Court approved Delphi's First Amended Joint Disclosure Statement and related solicitation procedures for the solicitation of votes on the First Amended Plan on Dec. 20, 2007. The Court confirmed the Debtors' First Amended Plan on Jan. 25, 2008. The Plan has not been consummated after a group led by Appaloosa Management, L.P., backed out from their proposal to provide US$2,550,000,000 in equity financing to Delphi. (Delphi Bankruptcy News, Issue No. 153; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) DISTRIBUTED ENERGY: Wants Plan Filing Period Extended to March 2 ---------------------------------------------------------------- Distributed Energy Systems Corp. and its wholly owned subsidiary, NPS Liquidating Inc., f.k.a. Northern Power Systems Inc., ask the U.S. Bankruptcy Court for the District of Delaware to extend their exclusive periods to: a) file a Chapter 11 plan to March 2, 2009; b) solicit acceptances of the plan to May 1, 2009. This is the Debtors' second request for an extension of these deadlines. The Debtors' current exclusive periods to file a Chapter 11 plan and solicit acceptances of such plan expires on Dec. 31, 2008, and March 2, 2009, respectively. The Debtors tell the Court that they have been engaged in extensive negotiations with the Official Committee of Unsecured Creditors and Perseus Partners VII, L.P. in an attempt to resolve the disputes between the Committee and Perseus. The Debtors also relate that they require the extensions requested to adequately evaluate their alternatives for a plan in these Chapter 11 cases. The Debtors add that the termination of their exclusive periods would adversely impact their efforts to preserve and maximize the value of their estates and the progress of these cases. Distributed Energy Systems Corp. and its wholly owned subsidiary, Northern Power Systems Inc., filed for Chapter 11 bankruptcy protection on May 4, 2008 (Bankr. D. Del. Lead Case No. 08-11101). Robert S. Brady, Esq., Edward J. Kosmowski, Esq., and Robert F. Poppiti, Jr., at Young, Conaway, Stargatt & Taylor LLP represent the Debtors in their restructuring efforts. The Debtors selected Epiq Systems as their claims agent. The U.S. Trustee for Region 3 appointed three creditors to serve on an Official Committee of Unsecured Creditors. Schuyler G. Carroll, Esq., Robert M. Hirsh, Esq., and Karen McKinley, Esq., at Arent Fox LLP, in New York, and John V. Fiorella, Esq., Charles C. Brown, III, Esq., and "J" Jackson Shrum, Esq., at Archer & Greiner, P.C., in Wilmington, Delaware, represent the Committee. The Debtors disclosed in their schedules, assets of $19,593,387 and debts of $43,558,713. EQUITY MEDIA: Hearing on Case Conversion to Liquidation Postponed ----------------------------------------------------------------- Mark Hengel at Arkansasbusiness.com reports that the U.S. Bankruptcy Court for the Eastern District of Arkansas said that it has postponed a hearing on Silver Point Finance LLC's plea to convert Equity Media Holding Corp.'s Chapter 11 reorganization case to Chapter 7 liquidation due to the winter weather. According to Arkansasbusiness.com, the hearing was scheduled for 9:00 a.m. on Dec. 16. No new date was set for the hearing, the report says. As reported by the Troubled Company Reporter on Dec. 12, 2008, Silver Point asked the Court to convert Equity Media's reorganization case to Chapter 7 liquidation, saying that the Debtor filed for Chapter 11 protection without any planning nor exit strategy, and that Equity Media had been a victim of "gross mismanagement." Arkansasbusiness.com relates that Equity Media owes Silver Point about $41.5 million. About Equity Media Little Rock, Arizona-based Equity Media Holdings Corp. -- http://www.emdaholdings.com/-- fka Equity Broadcasting Corporation, dba Coconut Palm Acquisition Corp. and Equity Broadcasting Corp., operates 121 television stations including 23 full power, 38 Class A and 60 low power stations. The company was founded in 1998. The company filed for Chapter 11 protection on Dec. 8, 2008 (Bankr. E. D. Ariz. Case No. 08-17646). James F. Dowden, Esq., who has an office at Little Rock, Arizona, represents the company in its restructuring effort. The company listed assets of $100,000,000 to $500,000,000 and debts of $50,000,000 to $100,000,000. FORD MOTOR: Moody's Says Likely Scenario Is Government Support -------------------------------------------------------------- The U.S. Government will likely provide immediate stopgap financing to bridge the major American auto companies until a more complete agreement can be reached early in 2009, says Moody's Investors Service in a new report that outlines the three mostly likely bailout and bankruptcy scenarios for government help to Ford, GM and Chrysler. "We think it's most likely that a prepackaged bankruptcy filing coupled with government financial assistance will be needed to restructure the Big Three," said Moody's Senior Vice President Bruce Clark, a co-author of the report. "The government will also probably offer support by providing or guaranteeing debtor-in- possession or DIP financing, and bondholder losses would probably be less than 75% in this scenario." In the wake of the domestic auto manufacturing companies' request for urgent financial assistance from the federal government, the Moody's report describes three bailout and bankruptcy scenarios for Detroit, assesses the probabilities of these scenarios, and examines the extent of likely losses in each of the scenarios for auto manufacturer debt holders. It then assesses the broader implications of the three scenarios, across the larger economy generally and specifically on 10 important financial and industrial sectors. These include auto-part manufacturers, captive finance companies, car rental companies, banks, auto dealers, steel, chemicals, rental car fleet securitizations, state and local governments, dealer floorplan securitizations, auto loan/lease securitizations, and rental car fleet securitizations. "A prepackaged bankruptcy might be the best approach to current problems, but achieving timely agreement from a broad range of creditors would be highly difficult, especially given the critical funding status of GM and Chrysler," said Mr. Clark. While the analyst and his Moody's colleagues give a prepackaged bankruptcy filing coupled with government financial assistance a 70% likelihood of coming to pass, they assign a 25% probability of a government bailout without a near-term automaker bankruptcy. "Under this less-likely scenario, a comprehensive bailout package is agreed to that enables the automakers to restructure without any bankruptcy filings during 2009. The degree of economic disruption and direct financial loss for investors would be contained, at least in the short term," said Mr. Clark. "Bondholder losses would be the least in this scenario, although there is a risk that such a reorganization would be inadequate, and that at least one automaker might file for bankruptcy beyond 2009." Given only a 5% likelihood, Moody's also considers the "freefall bankruptcy" scenario without a prepackage plan and without government involvement. This would involve the most significant disruption to the economy, including potential bankruptcies in associated industries such as auto parts suppliers and auto dealers. "The negative consumer sentiment and erosion of franchise value would make the reorganization process more complex for the automakers and a Chapter 7 liquidation of at least one of the automakers possible," said Mr. Clark. "Auto bondholder losses could be in the 75-100% range in this scenario." The report, "U.S. Automakers: Credit Implications of Three Scenarios Have Broad Reach," is available at: http://www/moodys.com/ FRONTIER AIRLINES: Court OKs Agreement With IBT Appearance Agents ----------------------------------------------------------------- Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York approved a new deal reached by Frontier Airlines, Inc., and the International Brotherhood of Teamsters On November 26, 2008, Frontier and the Teamsters told the Court that they have reached "a tentative long-term concessionary agreement modifying the terms of the CBA" concerning Appearance Agents and Maintenance Cleaners, which covers the period from September 16, 2005, through September 16, 2015. Frontier Airlines and its debtor-affiliates previously sought the Court's authority in September 2008, to (i) reject their collective bargaining agreements with the Teamsters Airline Division of the International Brotherhood of Teamsters, and (ii) implement the terms of their bargaining proposal to the Teamsters, in accordance with Section 1113 of the Bankruptcy Code. On November 14, 2008, the Court authorized the rejection of the CBAs effective October 31, except with respect to the Appearance Agents and Maintenance Cleaners. "The [Section 1113 Motion] filed by Frontier on September 12, 2008, only as it applied to the Appearance Agents and Maintenance Cleaners, is resolved and dismissed," the Court ruled. The CBAs cover wages, benefits, job security and other employment conditions for 425 members, specifically: * aircraft appearance agents and maintenance cleaners; * aircraft technicians, ground service equipment technicians and tool room attendants; and * material specialists. The Debtors noted that on an annualized basis, the Section 1113 Proposal saves Frontier $5,100,000, owing to, among other things, wage and premium reductions with respect to the covered Employees. "I would authorize the debtor to reject the IBT agreements with the exception of the appearance agents' collective bargaining agreement, which I understand the parties still want to continue to negotiate," Judge Drain said in his ruling. Except with respect to the Appearance Agents and Maintenance Cleaners, the Court also permitted Frontier to implement, and perform under, the terms of the Section 1113 Proposal, effective November 1, 2008. The Concessionary Agreement On November 26, 2008, Frontier and the Teamsters told the Court that they have reached "a tentative long-term concessionary agreement modifying the terms of the CBA" concerning Appearance Agents and Maintenance Cleaners, which covers the period from September 16, 2005 through September 16, 2015. Pursuant to the Amended CBA, the Teamsters agree that the wage rates for all Aircraft Appearance Agents and Maintenance Cleaners will be reduced as: Reduction Wage Period Percentage ----------- ---------- December 12, 2008 through December 11, 2009 6% December 12, 2009 through December 11, 2010 6% December 12, 2010 through December 11, 2011 3% December 12, 2011 through December 12, 2012 1% Frontier agrees that during its Chapter 11 cases, it will not seek further relief under Section 1113 of the Bankruptcy Code, with respect to the Appearance Agent Agreement unless the Company's financial performance or liquidity materially deteriorate as compared to the forecasts in the Seabury Group Business Plan for Frontier Airlines Version 4.2, published August 4, 2008. During the term of the Agreement, Frontier agrees not to partially or fully restore, effective prior to December 12, 2012, the Wages -- including holiday pay, uniform allowance and vacation pay -- of the non-supervisory Customer Service Agents, Catering Agents, Ramp Service Agents, Tower Operations Agents, and Scouts/Charter Operations Agents in the Customer Service Workgroup as compared to the pay scales in effect without providing an equivalent percentage improvement to the Appearance Agents and Maintenance Cleaners unless: -- the restored Customer Service Agents' wages or wage- equivalents would still represent an aggregate collective concession from the Customer Service Agents' W-2 compensation as of April 10, 2008, equal to or greater than the Appearance Agents' and Maintenance Cleaners' concessions in effect at that time; or -- the Customer Service Agents' wage restoration arose out of, or was otherwise in connection with or attributable to a legitimate business purpose, change in circumstances, or change in work conditions arising after the effective date of the Agreement, which (i) produces identifiable efficiencies or savings to the Company and (i) is applicable or relevant to the Customer Service Agents but not comparably applicable or relevant to the Appearance Agents and Maintenance Cleaners. Effective December 13, 2012, wage scales for Appearance Agents and Maintenance Cleaners, unless otherwise agreed in the interim, will revert to the rates set forth in the September 16, 2005 Agreement. The wage/benefits re-opener under the Agreement will be extended to December 12, 2012. Upon the Effective Date of the Concessionary Agreement, the Teamsters will have an allowed general non-priority unsecured claim for $472,196 against the Debtors under Section 502 of the Bankruptcy Code, which is not subject to reconsideration in respect of the concessions made by the Teamsters under the Concessionary Agreement. However, if the IBT pay rates are restored sooner than December 12, 2012, the Claim will be adjusted downward by the amount of the incremental wages paid as a result. None of the Teamsters or the Appearance Agents or Maintenance Cleaners will have any other claim or cause of action on account of the Concessionary Agreement. Any transfer of all or any part of the Claim prior to the Company's exit from bankruptcy may only be made in compliance with the Court's final order dated June 3, 2008, establishing procedures and approving restrictions on transfers of claims and interests. The Teamsters will have the sole authority and responsibility to determine the manner of allocation among Appearance Agents and Maintenance Cleaners on account of the Teamsters' Claim, provided that the allocation schedule or formula is delivered to the Company no later than 30 days prior to the date of distribution. To the extent reasonably practicable, Frontier will distribute the Claim proceeds to the identified employees. The Company will be responsible for the employer-share of any applicable payroll taxes. The Amended Agreement is subject to ratification by the Appearance Agent and Maintenance Cleaner membership, in accordance with the Teamsters' constitution. In a prior statement, the Union has disclosed that it intended to submit the Concessionary Agreement for Membership ratification until December 12, 2008. As of December 16, no ratification results have been disclosed by the Union. A full-text copy of the Concessionary Agreement is available at no charge at: http://bankrupt.com/misc/Frontier&IBTConcessionary_AppearanceAgent s&MaintenanceCleaners.pdf About Frontier Airlines Inc. Headquartered in Denver, Colorado, Frontier Airlines Inc. -- http://www.frontierairlines.com/-- provides air transportation for passengers and freight. It operates jet service carriers linking Denver, Colorado hub to 46 cities coast-to-coast, 8 cities in Mexico, and 1 city in Canada, as well as provide service from other non-hub cities, including service from 10 non-hub cities to Mexico. The Debtor and its debtor-affiliates filed for Chapter 11 protection on April 10, 2008, (Bankr. S.D. N.Y. Case No. 08-11297 thru 08-11299.) Benjamin S. Kaminetzky, Esq., and Hugh R. McCullough, Esq., at Davis Polk & Wardwell, represent the Debtors in their restructuring efforts. Togul, Segal & Segal LLP is the Debtors' Conflicts Counsel, Faegre & Benson LLP is the Debtors' Special Counsel, and Kekst and Company is the Debtors' Communications Advisors. (Frontier Airlines Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FRONTIER AIRLINES: IBT Pursues Appeal; Debtor Wants Stay Enforced ----------------------------------------------------------------- The Teamsters Airline Division of the International Brotherhood of Teamsters asks the U.S. District Court for the Southern District of New York to determine whether the Bankruptcy Court: * erred in permitting the reorganization of Frontier Airlines, Inc., and its affiliated parties and assuring that all affected parties were treated fairly and equitably as required by Section 1113 of the Bankruptcy Code; * erred in finding that Frontier met its obligation to provide timely relevant information to evaluate its proposal as its duty to bargain in good faith; * erred in granting Frontier's motion to reject its collective bargaining agreements with the Teamsters, notwithstanding evidence that the airline failed to negotiate in good faith; and * erred in granting Frontier's Motion based on positions Frontier first adopted after the parties' last bargaining session, disclosed at the hearing. As reported by the Dec. 1 edition of the Troubled Company Reporter, IBT notified the Bankruptcy Court that it will take an appeal to the District Court for the Southern District of New York from Judge Robert Drain's order granting Frontier Airlines' request to reject its collective bargaining agreement with the Teamsters. Frontier Wants Enforcement of Stay Pending Appeal Pursuant to Rule 8005 of the Federal Rules of Bankruptcy Procedure, the Teamsters asks the Bankruptcy Court to enforce a stay pending a ruling on its appeal of the Court's order rejecting the Union's CBAs with Frontier. The Stay, to the extent of the order rejecting the CBAs, applies to the scope, and the subcontracting provisions of, the Agreements, Marianne Goldstein Robbins, Esq., at Previant, Goldberg, Uelmen, Gratz, Miller, & Brueggeman, s.c., in Wisconsin, Milwaukee, said on behalf of the Teamsters. To recall, Judge Drain approved the Debtors' request to reject their CBAs with The Teamsters effective October 31, except with respect to appearance agents and maintenance cleaners. Judge Drain's Order is hinged upon Frontier's plan to furlough its heavy maintenance workers during periods in which the airline does not require heavy maintenance work, and recall these workers during periods that Frontier has work available. Among other things, the Court held that Frontier may outsource its aircraft maintenance only as a last resort -- after it has exhausted all other options to perform the heavy check work at its repair station in Denver, Colorado. Teamsters Local Union No. 961, argued that Frontier's outsourcing of all of its maintenance work to Aeroman, a company based in El Salvador, will displace the Union-represented mechanics in the airline. In response, the Debtors argued that the imposition of the Stay is not necessary because Frontier's outsourcing of C-check work is "a distant prospect -- a last resort -- that all parties agree will not occur for months or even years, if at all," Benjamin Kaminetzky, Esq., at Davis Polk & Wardwell, in New York, emphasized. In a statement filed with the Court, Elliot Moskowitz, an associate at Davis Polk & Wardwell, declared that the Teamsters have acknowledged and reflected in their press release dated November 3, 2008, that pursuant to the Court's order, Frontier can outsource maintenance only as a "last resort." Moreover, even if the "last resort" of outsourcing becomes necessary, Frontier will have to take a number of steps before outsourcing can begin, which would push off even further the possibility of any job loss, Mr. Kaminetzky averred. Mr. Kaminetzky noted that the Teamsters, as a party seeking a Stay pending appeal, must also demonstrate a "substantial possibility" of success on the merits, Mr. Kaminetzky notes, citing Calpine, 2008 WL 207841, at *4. In this regard, Mr. Kaminetzky reiterates that the Court has already ruled in favor of Frontier with respect to the Union's alleged failures of the Debtors to: (i) provide the dollar amounts or calculations concerning the amount needed in overall annual improvements; (ii) identify the amount required to allow the Debtors to reorganize by any means other than its bottom up budgeting process identifying the amount that can be obtained; and (iii) present a quote from a potential contractor which supports its claim of that it will realize savings from subcontracting. Mr. Kaminetzky told the Court that the issuance of a Stay "would send exactly the wrong message" to prospective exit financiers. "A finding by the Court that the [Teamsters] Union has shown a substantial possibility of success on the merits of its Appeal would seriously call into question the durability of the expense reductions," he maintained. Additionally, Mr. Kaminetzky added, a Stay would also materially affect and "make difficult" Frontier's ongoing negotiations with other constituencies, particularly, with the Frontier Airline Pilots Association. Hence, a Stay would complicate the Debtors' ongoing efforts to secure exit financing, which in turn, would hinder them from successfully emerging from bankruptcy and subsequently harm all parties-in-interest. While the Teamsters asserted that a Stay is in the public interest because "outsourcing is less safe and will lead to more cancellations," the Court acknowledged that (i) a host of other airlines outsource C-Check work, and (ii) Aeroman has a stellar safety and efficiency record, thereby refuting the Union's contention, Mr. Kaminetzky noted. Mr. Kaminetzky added that in the event that the Court finds that a Stay is warranted, the Stay must be conditioned upon the posting of an appropriately substantial bond in the amount of not less than $500,000. If the Teamsters will not consent to the posting of a bond in this amount, its "already heavy" burden for a Stay will be that much greater, Mr. Kaminetzky told Bankruptcy Court Judge Robert Drain. About Frontier Airlines Inc. Headquartered in Denver, Colorado, Frontier Airlines Inc. -- http://www.frontierairlines.com/-- provides air transportation for passengers and freight. It operates jet service carriers linking Denver, Colorado hub to 46 cities coast-to-coast, 8 cities in Mexico, and 1 city in Canada, as well as provide service from other non-hub cities, including service from 10 non-hub cities to Mexico. The Debtor and its debtor-affiliates filed for Chapter 11 protection on April 10, 2008, (Bankr. S.D. N.Y. Case No. 08-11297 thru 08-11299.) Benjamin S. Kaminetzky, Esq., and Hugh R. McCullough, Esq., at Davis Polk & Wardwell, represent the Debtors in their restructuring efforts. Togul, Segal & Segal LLP is the Debtors' Conflicts Counsel, Faegre & Benson LLP is the Debtors' Special Counsel, and Kekst and Company is the Debtors' Communications Advisors. (Frontier Airlines Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FRONTIER AIRLINES: Reports 14.1% Drop in Workforce -------------------------------------------------- Frontier Airlines, for the fourth consecutive month, disclosed a year-over-year drop in the number of its employees, the Denver Business Journal reports, citing statistics from the Federal Bureau of Transportation. The report said Frontier has laid off employees since June 2008. October saw the largest decline for Frontier, the report says, where it reported 4,460 full-time equivalent employees at the end of the month -- down 14.1 percent from October 2007, the airline revealed in its monthly employee report. The full-time equivalent numbers count two part-time employees as being equal to one full-time worker, according to the newspaper. The carrier's employee count was down 14%, 10.8% and 6.6% in September, August and July, respectively, reports the Denver Journal. About Frontier Airlines Inc. Headquartered in Denver, Colorado, Frontier Airlines Inc. -- http://www.frontierairlines.com/-- provides air transportation for passengers and freight. It operates jet service carriers linking Denver, Colorado hub to 46 cities coast-to-coast, 8 cities in Mexico, and 1 city in Canada, as well as provide service from other non-hub cities, including service from 10 non-hub cities to Mexico. The Debtor and its debtor-affiliates filed for Chapter 11 protection on April 10, 2008, (Bankr. S.D. N.Y. Case No. 08-11297 thru 08-11299.) Benjamin S. Kaminetzky, Esq., and Hugh R. McCullough, Esq., at Davis Polk & Wardwell, represent the Debtors in their restructuring efforts. Togul, Segal & Segal LLP is the Debtors' Conflicts Counsel, Faegre & Benson LLP is the Debtors' Special Counsel, and Kekst and Company is the Debtors' Communications Advisors. (Frontier Airlines Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) FRONTIER AIRLINES: CEO & James Upchurch Dispose of All Shares ------------------------------------------------------------- In a regulatory filing with the Securities and Exchange Commission dated December 12, 2008, James B. Upchurch, a director at Frontier Airlines Holdings, Inc., reported that on Dec. 11, 2008, he disposed of 59,620 shares of the Company's common stock at a $0.2 price. Following the transaction, he indirectly owned 54,880 shares. On Dec. 12, 2008, Mr. Upchurch disposed of a total of 30,380 shares of Frontier common stock in two transactions, at prices of $0.2 and $0.185, leaving him with indirect ownership of 24,500 shares. Mr. Upchurch added that on Dec. 15, he disposed of an aggregate of 27,500 shares during two separate transactions at prices of $0.18 and $0.185. Thereafter, he was left with 5,000 shares of Frontier common stock, which he directly owned. Matthew R. Henry, attorney-in-fact for Mr. Upchurch said that after acquiring 5,000 shares of Frontier stock at $0.195 per share, Mr. Upchurch directly owned 0 shares of the Company's common stock. Meanwhile, Sean E. Menke, Frontier Airline's president and chief executive officer, disclosed with the SEC that on December 15, 2008, he disposed of 13,952 shares of the Company's common stock at a price of $0.2 per share. Following the transaction, Mr. Menke directly and beneficially owned zero shares of Frontier common stock. GENERAL GROWTH: Has Not Reached Deal With Lenders on $900MM Loan ---------------------------------------------------------------- General Growth Properties, Inc. has not reached unanimous agreement with its syndicate of lenders to further extend the maturity date on the $900 million Fashion Show and Palazzo mortgage loans. The company said it is continuing its discussions with lenders regarding its loans. GGP is in talks with its syndicate of lenders for a further extension of the Fashion Show and Palazzo mortgage loans scheduled to mature on Dec. 12, 2008. GGP has had considerable difficulty recently in accessing the secured debt markets. GGP has almost $1 billion of secured and unsecured debt maturing by the end of 2008 and an additional $3.1 billion maturing in 2009. As reported in yesterday's Troubled Company Reporter, Fitch Ratings has downgraded the Issuer Default Ratings of GGP to 'C' from 'B' on grounds that "default of some kind appears imminent." Moody's Investors Service has also downgraded the ratings on General Growth Properties, Inc., certain of its subsidiaries and The Rouse Company LP (to Ca from Caa2 senior secured bank debt; to Ca from Caa2 senior unsecured debt). The ratings remain on review for possible downgrade. The rating action reflects a heightened likelihood of default and the potential for above average loss severity in the event of default for debt holders of General Growth and for Rouse bondholders. The REIT's failure to repay $900mm in mortgages on December 12, 2008, will most likely lead to an imminent acceleration of debt on the Rouse bonds. Based in Chicago, Illinois, General Growth Properties, Inc. (NYSE:GGP) -- http://www.ggp.com/-- is the second-largest U.S. mall owner with 200-plus shopping malls in 44 states. General Growth is a self-administered and self-managed real estate investment trust. General Growth owns, manages, leases and develops retail rental property, primarily shopping centers. Substantially all of its properties are located in the United States, but the company also has retail rental property operations and property management activities -- through unconsolidated joint ventures -- in Brazil and Turkey. Its Master Planned Communities segment includes the development and sale of residential and commercial land, primarily in large-scale projects in and around Columbia, Maryland; Houston, Texas; and Summerlin, Nevada, as well as the development and sale of its one residential condominium project located in Natick (Boston), Massachusetts. General Growth said in a regulatory filing Sept. 30 that its potential inability to address its 2008 or 2009 debt maturities in a satisfactory fashion raises substantial doubts as to its ability to continue as a going concern. General Growth had $29.6 billion in total assets and $27.3 billion in total liabilities as at Sept. 30. * * * As reported by the Troubled Company Reporter on Dec. 11, 2008, Fitch Ratings, has downgraded the Issuer Default Ratings and outstanding debt ratings of General Growth Properties to 'C' from 'B'. GENERAL MOTORS: E.D. Mich. Preps for Chapter 11 Filing in Detroit ----------------------------------------------------------------- The judges sitting in the U.S. Bankruptcy Court for the Eastern District of Michigan entered an administrative order last week giving Chief Judge Steven Rhodes the authority to assign "a very large, complex case of national significance" to a specific bankruptcy judge "after consulting with the other bankruptcy judges," rather than using the traditional blind draw system. Additionally, the administrative order provides that "the bankruptcy judge to whom the [very large, complex case of national significance] is assigned shall have the authority to assign adversary proceedings and contested matters to other bankruptcy judges as necessary and appropriate." A copy of the order is posted at http://www.mieb.uscourts.gov/notices/ao08-24.pdf The Bankruptcy Court in Detroit announced this week that it is accepting applications for temporary clerical "positions that may become available in the next several months." About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908. GM employs about 266,000 people around the world and manufactures cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. General Motors Latin America, Africa and Middle East, with headquarters in Miramar, Florida, is one of GM's four regional business units. GM LAAM employs approximately 37,000 people in 18 countries and has manufacturing facilities in Argentina, Brazil, Colombia, Ecuador, Egypt, Kenya, South Africa and Venezuela. GM LAAM markets vehicles under the Buick, Cadillac, Chevrolet, GMC, Hummer, Isuzu, Opel, Saab and Suzuki brands. As reported in the Troubled Company Reporter on Nov. 10, 2008, General Motors Corporation's balance sheet at Sept. 30, 2008, showed total assets of $110.425 billion, total liabilities of $170.3 billion, resulting in a stockholders' deficit of $59.9 billion. * * * As reported in the Troubled Company Reporter on Nov. 11, 2008, Standard & Poor's Ratings Services lowered its ratings, including the corporate credit rating, on General Motors Corp. to 'CCC+' from 'B-' and removed them from CreditWatch, where they had been placed with negative implications on Oct. 9, 2008. S&P said that the outlook is negative. Fitch Ratings, as reported in the Troubled Company Reporter on Nov. 11, 2008, placed the Issuer Default Rating of General Motors on Rating Watch Negative as a result of the company's rapidly diminishing liquidity position. Given the current liquidity level of $16.2 billion and the pace of negative cash flows, Fitch expects that GM will require direct federal assistance over the next quarter and the forbearance of trade creditors in order to avoid default. With virtually no further access to external capital and little potential for material asset sales, cash holdings are expected to shortly reach minimum required operating levels. Fitch placed these on Rating Watch Negative: -- Senior secured at 'B/RR1'; -- Senior unsecured at 'CCC-/RR5'. As reported in the Troubled Company Reporter on June 24, 2008, DBRS has placed the ratings of General Motors Corp. and General Motors of Canada Limited Under Review with Negative Implications. The rating action reflects the structural deterioration of the company's operations in North America brought on by high oil prices and a slowing U.S. Economy. GENERAL MOTORS: Moody's Says Likely Scenario Is Government Support ------------------------------------------------------------------ The U.S. Government will likely provide immediate stopgap financing to bridge the major American auto companies until a more complete agreement can be reached early in 2009, says Moody's Investors Service in a new report that outlines the three mostly likely bailout and bankruptcy scenarios for government help to Ford, GM and Chrysler. "We think it's most likely that a prepackaged bankruptcy filing coupled with government financial assistance will be needed to restructure the Big Three," said Moody's Senior Vice President Bruce Clark, a co-author of the report. "The government will also probably offer support by providing or guaranteeing debtor-in- possession or DIP financing, and bondholder losses would probably be less than 75% in this scenario." In the wake of the domestic auto manufacturing companies' request for urgent financial assistance from the federal government, the Moody's report describes three bailout and bankruptcy scenarios for Detroit, assesses the probabilities of these scenarios, and examines the extent of likely losses in each of the scenarios for auto manufacturer debt holders. It then assesses the broader implications of the three scenarios, across the larger economy generally and specifically on 10 important financial and industrial sectors. These include auto-part manufacturers, captive finance companies, car rental companies, banks, auto dealers, steel, chemicals, rental car fleet securitizations, state and local governments, dealer floorplan securitizations, auto loan/lease securitizations, and rental car fleet securitizations. "A prepackaged bankruptcy might be the best approach to current problems, but achieving timely agreement from a broad range of creditors would be highly difficult, especially given the critical funding status of GM and Chrysler," said Mr. Clark. While the analyst and his Moody's colleagues give a prepackaged bankruptcy filing coupled with government financial assistance a 70% likelihood of coming to pass, they assign a 25% probability of a government bailout without a near-term automaker bankruptcy. "Under this less-likely scenario, a comprehensive bailout package is agreed to that enables the automakers to restructure without any bankruptcy filings during 2009. The degree of economic disruption and direct financial loss for investors would be contained, at least in the short term," said Mr. Clark. "Bondholder losses would be the least in this scenario, although there is a risk that such a reorganization would be inadequate, and that at least one automaker might file for bankruptcy beyond 2009." Given only a 5% likelihood, Moody's also considers the "freefall bankruptcy" scenario without a prepackage plan and without government involvement. This would involve the most significant disruption to the economy, including potential bankruptcies in associated industries such as auto parts suppliers and auto dealers. "The negative consumer sentiment and erosion of franchise value would make the reorganization process more complex for the automakers and a Chapter 7 liquidation of at least one of the automakers possible," said Mr. Clark. "Auto bondholder losses could be in the 75-100% range in this scenario." The report, "U.S. Automakers: Credit Implications of Three Scenarios Have Broad Reach," is available at: http://www/moodys.com/ GENERAL MOTORS: Will Stop Construction of Flint Factory ------------------------------------------------------- The Associated Press reports that General Motors Corp. said that it would stop construction works for a factory in Flint, Michigan. According to The AP, GM is trying to conserve cash so it can continue operations next year. The factory, says the report, was set to make 1.4-liter engines for GM's Chevrolet Cruze and the Chevy Volt plug-in electric car. Citing GM spokesperson Sharon Basel, The AP relates that the construction delay may be temporary until the firm figures out its cash situation. The AP quoted Ms. Basel as saying, "Everything that involves heavy cash outlays obviously is under review. Our intent is to still go forward with a new facility bringing that engine to Flint, Michigan." Sharon Terlep at The Wall Street Journal reports that GM said on Tuesday it will proceed with plans to deliver its Chevrolet Volt electric car by 2010, with or without government bailout. WSJ relates that The Volt is GM's most high-profile project Opens China Plant Norihiko Shrouzu and Patricia Jiayi Ho at The Wall Street Journal state that GM opened a new passenger-vehicle plant in China on Wednesday. The report says that the plant has already started producing Chevrolet Cruze, the first compact sedan for the Chevy franchise in China. The new car would arrive in dealer showrooms in the second quarter of 2009, the report states, citing GM. According to WSJ, the Cruze plant is GM's second in Shenyang operated with Shanghai Automotive Industry Corp., as it already has a plant there that produces minivans Buick GL8 and the Buick FirstLand. WSJ reports that GM has high hopes for the Cruze as Chinese consumers would likely to become more frugal amid a general economic slowdown. About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908. GM employs about 266,000 people around the world and manufactures cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. General Motors Latin America, Africa and Middle East, with headquarters in Miramar, Florida, is one of GM's four regional business units. GM LAAM employs approximately 37,000 people in 18 countries and has manufacturing facilities in Argentina, Brazil, Colombia, Ecuador, Egypt, Kenya, South Africa and Venezuela. GM LAAM markets vehicles under the Buick, Cadillac, Chevrolet, GMC, Hummer, Isuzu, Opel, Saab and Suzuki brands. As reported in the Troubled Company Reporter on Nov. 10, 2008, General Motors Corporation's balance sheet at Sept. 30, 2008, showed total assets of $110.425 billion, total liabilities of $170.3 billion, resulting in a stockholders' deficit of $59.9 billion. * * * As reported in the Troubled Company Reporter on Nov. 11, 2008, Standard & Poor's Ratings Services lowered its ratings, including the corporate credit rating, on General Motors Corp. to 'CCC+' from 'B-' and removed them from CreditWatch, where they had been placed with negative implications on Oct. 9, 2008. S&P said that the outlook is negative. Fitch Ratings, as reported in the Troubled Company Reporter on Nov. 11, 2008, placed the Issuer Default Rating of General Motors on Rating Watch Negative as a result of the company's rapidly diminishing liquidity position. Given the current liquidity level of $16.2 billion and the pace of negative cash flows, Fitch expects that GM will require direct federal assistance over the next quarter and the forbearance of trade creditors in order to avoid default. With virtually no further access to external capital and little potential for material asset sales, cash holdings are expected to shortly reach minimum required operating levels. Fitch placed these on Rating Watch Negative: -- Senior secured at 'B/RR1'; -- Senior unsecured at 'CCC-/RR5'. As reported in the Troubled Company Reporter on June 24, 2008, DBRS has placed the ratings of General Motors Corp. and General Motors of Canada Limited Under Review with Negative Implications. The rating action reflects the structural deterioration of the company's operations in North America brought on by high oil prices and a slowing U.S. Economy. GOLDEN STATE FOODS: Lack of Info Cues Moody's to Withdraw Ratings ----------------------------------------------------------------- Moody's Investors Service withdrew all ratings of Golden State Foods Corporation, including the company's B1 corporate family rating and B1 probability of default rating. The ratings have been withdrawn because Moody's believes it lacks adequate information to maintain a rating. Ratings withdrawn: * Corporate family rating at B1 * Probability of default rating at B1 * Senior secured revolving credit agreement, originally expiring in February 2009 but repaid early, at B1 (LGD3,48%) * Senior secured Term Loan A, originally maturing in February 2009 but repaid early, at B1 (LGD3,48%) * Senior secured Term Loan B, originally maturing in February 2011 but repaid early, at B1 (LGD3,48%) * Subordinated Notes at B3 (LGD5,88%) Golden State Foods Corporation is an integrated supplier to McDonald's system, manufacturing and distributing meat products, liquids and other goods. This privately owned company is headquartered in Irvine, California. Moody's most recent rating action was the assignment of a probability of default rating to the company, the affirmation of other long term ratings, and the assignment of LGD ratings and percentages to the rated debt instruments on September 21, 2006. HARRAH'S ENTERTAINMENT: Industry to Remain Under Pressure in 2009 ----------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) HEXION SPECIALTY: S&P Keeps Ratings on Negative CreditWatch ----------------------------------------------------------- Standard & Poor's Ratings Services said its ratings on Columbus, Ohio-based Hexion Specialty Chemicals Inc. remain on CreditWatch, where they were placed with negative implications on July 5, 2007. The initial CreditWatch placement followed the announcement of Hexion's proposed debt-financed acquisition of Huntsman Corp. in a transaction valued at more than $10 billion, including assumed debt. According to S&P: "The CreditWatch update follows Hexion's recent announcement of its settlement agreement and the termination of its merger agreement with Huntsman. The settlement agreement provides for the dismissal of pending lawsuits against Hexion, which will eliminate the high litigation risk that has weighed down credit quality. The lawsuits will be dismissed once Huntsman receives all payments due to it under the agreements, which are expected to be made not later than March 31, 2009. Under the agreements, Hexion will pay Huntsman a $325 million break-up fee, which Hexion intends to fund by using an existing committed credit facility at unrated Hexion LLC, the parent company. In addition, certain affiliates of unrated Apollo Management L.P. will pay Huntsman $425 million in cash and purchase $250 million of Huntsman convertible notes. At least $500 million of the payments are to be made by Dec. 31, 2008. "In addition to the elimination of legal risk, the termination of the merger agreement also eliminates the prospect of a more highly leveraged merged entity. In a related development, Hexion's liquidity is expected to be bolstered by a $200 million investment by affiliates of Apollo. However, the elimination of these key risks are offset by the prospect of weaker operating performance at Hexion and increasing concerns on covenant compliance in 2009. We are increasingly concerned that the economic slowdown will result in further deterioration of Hexion's already stretched financial risk profile. In particular, we are concerned that cushions under a financial covenant could deteriorate and potentially constrain liquidity. A meaningful portion of Hexion's sales are to cyclical end markets such as construction and industrial, which are vulnerable to demand contractions during economic downturns. The ongoing broad-based global economic slowdown has the potential to offset benefits to Hexion's earnings from its global diversification and from steps undertaken by management to shore up earnings. "The company is highly leveraged; total debt to EBITDA is more than 9x after adjustments to debt, including tax-adjusted unfunded employee benefit obligations and the capitalized present value of operating leases. Our leverage calculation is as of Sept. 30, 2008, and pro forma for the $325 million of borrowings at Hexion LLC, which will fund the break-up fee. "As of Sept. 30, 2008, Hexion had about $21 million available under its $225 million revolving credit facility, $234 million in cash, and about $66 million available under credit facilities at subsidiaries. However, if operating results deteriorate, we expect the EBITDA cushion under the covenant to decline to low- single-digit percentage levels. Such a scenario would be a material concern given the difficult credit markets facing highly leveraged companies. "The ratings on Hexion will remain on CreditWatch negative until all payments under the settlement agreement have been made to Huntsman, resulting in the dismissal of lawsuits against Hexion, and until we have evaluated Hexion's operating performance in the next few quarters to ascertain the effect of the ongoing economic slowdown on the company. The CreditWatch listing also indicates that the ratings remain at risk of a slight downgrade if operational issues such as weak earnings in the next few quarters result in declining covenant cushions and further stretch Hexion's already highly leveraged financial profile. The CreditWatch resolution will address the pending changes to the company's capital structure, which could affect our recovery analysis and notching of existing debt issues." The Troubled Company Reporter reported on Nov. 6, 2008, that Standard & Poor's Ratings Services lowered its ratings on Hexion Specialty Chemicals Inc., including the corporate credit rating to 'B-' from 'B'. All of the ratings on Hexion remain on CreditWatch, where they were placed with negative implications on July 5, 2007. HINES HORTICULTURE: Court OKs Sale of All Assets to Black Diamond ----------------------------------------------------------------- The Hon. Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware authorized the sale of substantially all assets of Hines Horticulture Inc. and Hines Nurseries Inc. to an affiliate of Black Diamond Capital LLC, Bloomberg News reports. According to Bloomberg, the Black Diamond unit was declared the winning bidder when no other competing offers were made. The auction was canceled, the report says. The Black Diamond unit, Bloomberg relates, made a $58 million offer in cash and agreed to take on more than $45.9 million in debts. Judge Carey said he approved the sale because there is no better offer, Bloomberg adds. About Hines Horticulture Headquartered in Irvine, California, Hines Horticulture, Inc. -- http://www.hineshorticulture.com/-- operates nursery facilities located in Arizona, California, Oregon and Texas. Through its affiliate, the company produces and distributes horticultural products. The company and its affiliate, Hines Nurseries, Inc., filed for Chapter 11 protection on Aug. 20, 2008 (Bankr. D. Del. Lead Case No.08-11922). Anup Sathy, Esq., Ray C.Schrock, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructure efforts. Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young, Conaway, Stargatt & Taylor, serve as the Debtors' co-counsel. The Debtors selected Epiq Bankruptcy Solutions LLC as their voting and claims agent, and Financial Balloting Group LLC as their securities voting agent. The U.S. Trustee for Region 3 appointed creditors to serve on an Official Committee of Unsecured Creditors in the Debtors' case. In its schedules, Hines Horticulture, Inc. listed total assets of $30,068 and total debts of $218,052,380. In its schedules, Hines Nurseries, Inc. listed total assets of $229,231,003 and total debts of $228,698,592. HINES HORTICULTURE: Court Approves Disclosure Statement ------------------------------------------------------- The Hon. Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware approved a disclosure statement explaining a Chapter 11 plan of reorganization filed by Hines Horticulture Inc. and Hines Nurseries Inc. on Aug. 29, 2008. He found that the disclosure statement contains adequate information in accordance to Section 1125 of the United States Bankruptcy Code. Judge Carey also approved procedures the Debtors proposed for solicitation and tabulation of plan votes. Deadline to vote for the plan is Jan. 21, 2009. A hearing is set of Jan. 28, 2009, at 1:30 p.m., to consider confirmation of the Debtors' plan. Objections, if any, are due Jan. 26, 2009 The Troubled Company Reporter on Sept. 2, 2008, said the Debtors' plan contemplates the sale of substantially all of the Debtors' assets through a liquidation process. After the auction, all remaining assets will be liquidated and the proceeds distributed to the Debtors' creditors pursuant to the plan. On the plan's effective date, proceeds from the sale will be distributed to holders of claims. The Debtors selected Black Diamond Management LLC, as stalking- horse bidder. The plan classifies interests against and claims in the Debtors in eight classes. The classification of interests and claims are: Treatment of Interests and Claims Type Estimated Class of Claims Treatment Recovery ----- --------- --------- --------- 1 other priority unimpaired 100% claims 2 other secured unimpaired 100% claims 3 prepetition credit unimpaired 100% facility claims 4 10.25% senior notes impaired __% claims 5A general unsecured impaired __% claims against Hines Horticulture impaired __% 5B general unsecured impaired __% claims against Hines Nurseries 6 section 510(b) impaired 0% claims 7 equity interest in impaired 0% Hines Horticulture 8 intercompany impaired 0% interests Classes 4, 5A and 5B are entitled to vote to accept or reject the plan. Holders of Class 2 other secured claims will be place in a separate subclass, and each subclass will be treated as a separate class for distribution purposes. Unless otherwise agreed to by the holders and the Debtors, each holders will receive in full: -- the collateral securing the allowed other secured claim; or -- a cash distribution in an amount equal to the value of the collateral. Allowed Cass 3 claims will be allowed in the amount of $36,054,784 plus (i) interests and payable from the petition date to the plan's effective date, and (ii) fees and expenses payable to the prepetition credit facility agent from the petition date until the plan's effective. Holders of Class 10.25% senior notes claims will receive their pro rata share of the post-consummation trust assets in turn for each 10.25% senior notes claims. All general unsecured claims against the Debtors will also receive a pro rate share of the post-consummation trust assets. Class 6,7 and 8 will not receive any distribution under the plan. A full-text copy of the Debtors' disclosure statement is available for free at http://ResearchArchives.com/t/s?3188 A full-text copy of the Debtors' Chapter 11 plan of reorganization is available for free at http://ResearchArchives.com/t/s?3189 About Hines Horticulture Headquartered in Irvine, California, Hines Horticulture, Inc. -- http://www.hineshorticulture.com/-- operates nursery facilities located in Arizona, California, Oregon and Texas. Through its affiliate, the company produces and distributes horticultural products. The company and its affiliate, Hines Nurseries, Inc., filed for Chapter 11 protection on Aug. 20, 2008 (Bankr. D. Del. Lead Case No.08-11922). Anup Sathy, Esq., Ray C.Schrock, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructure efforts. Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young, Conaway, Stargatt & Taylor, serve as the Debtors' co-counsel. The Debtors selected Epiq Bankruptcy Solutions LLC as their voting and claims agent, and Financial Balloting Group LLC as their securities voting agent. The U.S. Trustee for Region 3 appointed creditors to serve on an Official Committee of Unsecured Creditors in the Debtors' case. In its schedules, Hines Horticulture, Inc. listed total assets of $30,068 and total debts of $218,052,380. In its schedules, Hines Nurseries, Inc. listed total assets of $229,231,003 and total debts of $228,698,592. HUNTSMAN CORP: S&P Keeps 'BB-' Credit Rating on Negative Watch -------------------------------------------------------------- Standard & Poor's Ratings Services said it is keeping its ratings on Salt Lake City, Utah-based Huntsman Corp., including the 'BB-' corporate credit rating, on CreditWatch, where they were placed on June 26, 2007, with negative implications. S&P said: "This update follows Huntsman's announcement that it has terminated its merger agreement with Hexion Specialty Chemicals Inc. Under the terms of a settlement with Hexion and Apollo Management L.P., Huntsman expects to receive cash payments of $1 billion, consisting of $750 million of settlement payments and $250 million of cash proceeds from the issuance of 10-year convertible notes to Apollo affiliates, which Huntsman can repay in cash or common stock. The settlement payments consist of $325 million from a break-up fee due from Hexion, which Hexion will fund through an existing committed credit facility, and $425 million that Apollo affiliates will fund. At least $500 million of the payments are to be paid to Huntsman on or before Dec. 31, 2008. "The settlement brings to an end the litigation process against Apollo and Hexion in connection with Hexion's proposed $10 billion acquisition of Huntsman, which stalled because of adverse changes in credit market and business conditions. "We will keep our ratings on Huntsman on CreditWatch negative until there is further clarity on the use of the cash proceeds and after we evaluate the implications of expected debt reduction on the financial profile of the company," explained Standard & Poor's credit analyst Kyle Loughlin. "Also key to resolving the CreditWatch status of the ratings will be the understanding of which debt obligations will be reduced with the cash proceeds, so that we can update our recovery analysis and recovery ratings and notching of existing rated debt." "Based on public comments, we expect that Huntsman will use the vast majority of the proceeds to reduce debt and to bolster liquidity in the face of sharply trimmed demand for chemicals products across the industry. Given the company's capital structure, we anticipate that it will likely aim its debt reduction at reducing borrowings under the committed bank credit facilities to bolster short-term liquidity and to ensure the company is well positioned to meet the maturity of approximately $296 million of notes in 2010. "We expect to resolve the CreditWatch status of the ratings in the next quarter as more information becomes available on the expected use of the settlement proceeds and after we review Huntsman's business and financial outlook now that the merger agreement with Hexion has been terminated. Also pending is Huntsman's litigation against the banks that committed to fund the Hexion merger in 2007. A jury trial on those claims is set to begin on May 11, 2009." ILLINOIS FINANCE: Fitch Holds 'BB-' Rating on $80.5 Million Bonds ----------------------------------------------------------------- Fitch Ratings has affirmed the 'BB-' rating on the $80.5 million Illinois Finance Authority revenue bonds, series 2005A&B (Friendship Village of Schaumburg). The Rating Outlook is revised to Stable from Negative. The affirmation at BB-' reflects Friendship Village of Schaumburg's (FVS) light liquidity position, the on-going challenge of converting sales to move-ins and a lack of improvement in occupancy in the Bridgegate (BG) apartments. At Oct. 31, 2008 FVS reported 329 days cash on hand (as defined under the Master Trust Indenture) which includes $25.3 million of initial entrance fees in the entrance fee reserve account. Under the indenture, moneys in the entrance fee reserve account are to be used to redeem $25 million of the series 2005C variable rate demand bonds only to the extent that such redemption would not cause the days cash on hand to fall below the liquidity requirement which is currently 165 days. FVS and the bank letter of credit provider have agreed to keep $10 million in the entrance fee reserve account and redeem $15 million of the series 2005C bonds from initial entrance fees. Amounts in the entrance fee reserve account used to comply with the liquidity requirement will be incorporated by Fitch in calculating various liquidity ratios. Thus, FVS' days cash on hand, cushion ratio and percentage of cash to debt at Dec. 31, 2008 are expected to be approximately 165, 2.4 times (x) and 17%, respectively. The continuing weakness in the local residential real estate market combined with the volatile financial markets has made converting sales to move-ins highly challenging. As of Dec. 12, 2008 FVS was in compliance with sales and occupancy covenants on The Bridgewater Place apartments which were 80% occupied and 86% sold. Management has been proactive in developing several marketing initiatives to counteract the current market environment. Lead generation has been solid, and sales initiatives have been successful in improving overall sales relative to the initial contract offerings. A marketing consultant's report has generated recommendations which are being implemented. However, inducing potential residents to move-in is taking longer and requiring greater incentives than expected which has dampened FVS' financial performance and cash generation from original projections. Occupancy in the BG apartments continues to lag projections reflecting the more difficult sales and marketing environment and turnover of existing units. At Oct. 31, 2008, census in the BG apartments was 363 compared to 365 at March 31, 2008. Sales of the BG apartments through the 7-month period ended Oct. 31, 2008 have totaled 49 which is ahead of the 46 recorded in the same period of the prior year. However, the turnover of apartments in BG has kept overall occupancy unchanged. The Outlook revision to Stable from Negative reflects Fitch's belief that FVS will continue to generate incremental apartment sales which will improve liquidity indicators. Various marketing initiatives have been successful in spite of the very difficult operating environment. Fitch intends to formally review FVS within the next six months. Friendship Village of Schaumburg is a Type B continuing care retirement community (CCRC) currently consisting of 629 independent living apartments, 28 independent living cottages, 99 assisted living units (including 23 dementia units) and 248 skilled nursing beds. The facility is located in Schaumburg, IL, approximately 30 miles northwest of downtown Chicago. In fiscal 2008, FVS had total revenues of $38.8 million. FVS' disclosure language provides for annual audited financials and quarterly financial statements to be delivered to bondholders. Fitch views FVS' disclosure language favorably. Disclosure to date has been excellent and includes regularly scheduled investor calls. INN OF THE MOUNTAIN: S&P Junks Corp. & Debt Ratings; Outlook Neg. ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured debt ratings on Inn of the Mountain Gods Resort and Casino (IMG) to 'CCC' from 'B'. The rating outlook is negative. IMG is a wholly owned enterprise of the Mescalero Apache Tribe, a federally recognized tribe located in south- central New Mexico. "The ratings downgrade reflects continued weak operating performance and our concerns surrounding IMG's near-term liquidity position," noted Standard & Poor's credit analyst Ariel Silverberg. "We expect that negative trends will continue at least through the remainder of IMG's fiscal year (ending April 2009). Therefore, we believe that IMG will be challenged in the next 12 months to meet its fixed obligations related to its senior notes and furniture, fixtures, and equipment (FF&E) facility, totaling approximately $30 million, as well as approximately $3 million in annual maintenance-related capital expenditures. IMG does not have a revolving credit facility and must rely primarily on EBITDA generation to service its obligations. We estimate that if EBITDA continues to fall at a low-teens percentage rate (EBITDA for the first six months of fiscal 2009, ending Oct. 31, 2008, adjusted for one-time charges, declined 13% year over year), IMG will be challenged to meet its fixed obligations, and EBITDA interest coverage will fall to close to 1.0x. "The 'CCC' corporate credit rating reflects our near-term liquidity concerns, IMG's status as a sole property operator, and the remoteness of the casino's location. "For the 12 months ended Oct. 31, 2008, adjusted debt to EBITDA was 6.2x (an increase from 5.8x at April 30, 2008) and EBITDA coverage of interest expense was 1.3x, versus 1.4x at April 30, 2008, due to a decline in EBITDA." IMG owns and operates the Travel Center Casino, the Inn of the Mountain Gods Resort and Casino, Ski Apache, and various outdoor amenities. The casinos offer a combined 1,444 slot machines and 47 table games. IMG also owns and operates Ski Apache, the second largest ski resort in New Mexico, as well as various outdoor activities. IMG draws its customer base from western Texas, as well as population bases in southern New Mexico, such as the cities of Las Cruces and Roswell nearly 100 miles away. We expect customer visitation to increase somewhat, given the recent decline in gas prices. JAYS FOODS: Chapter 11 Dismissed Due to Lack of Funds ----------------------------------------------------- The United States Bankruptcy Court for the Northern District of Illinois approved the request of Jays Foods Inc., for dismissal of its Chapter 11 case. According to Bloomberg News' Bill Rochelle, the Debtor told the bankruptcy court all the assets are gone; the secured lender is $2.9 million short of being paid in full, and the remaining $300,000 will pay only part of the outstanding professional expenses in the Chapter 11 effort. Jays Foods, according to Bloomberg, had sold its assets for $24.8 million to rival manufacturer Snyder's of Hanover just over a year ago. Mr. Rochelle relates that the Bankruptcy Court ruled that Jays Foods' remaining money be used first to pay the U.S. Trustee for its fees, with leftover funds going next to the professionals, and then to the secured lender if anything remains. He adds that $1.65 million from proceeds for the sale of Jays Foods business has been set aside to pay professional fees. About Jays Foods Chicago-based Jays Foods Inc. -- http://www.jaysfoods.com/-- wholesales confectionery products and manufactures snack chip products. Jays Foods leases real property, and owns certain equipment, in Chicago, Illinois where it operates a manufacturing facility that makes snacks mostly under the Jays, O-KE-DOKE and Krunchers brand names. Jays is 100% owned by Jays Holding Company, Inc. The company, then known as Jays Food LLC, first filed for chapter 11 protection on March 5, 2004 (Bankr. N.D. Ill. Case No. 04- 08681). David Missner, Esq., Marc I. Fenton, Esq. and Thomas Zwartz, Esq. at Piper Rudnick LLP were counsels to the Debtor. In the March 2004 case, a Section 363 sale took place and most of the assets of former Jays Foods were sold to Jays Foods Acquisition Inc., predecessor to Jays Foods Inc. The March 2004 case was closed on or about March 9, 2007. Select Snacks Inc., on the other hand, owns real property, improvements and equipment in Jeffersonville, Indiana where it operates a manufacturing facility that makes private label and co- manufactured snacks for its customers. Select Snacks is 100% owned by Select Snacks Holdings Company, Inc. Both Select Holding and Jays Holding are 100% owned by Ubiquity Brands LLC. As of the Oct. 11, 2007, the Debtors had approximately 943 employees of which Select has 262 (211 union employees and, 51 non-union employees) and Jays has 681 total employees (236 union employees and 445 non-union employees). Jays Foods and Select Snacks filed voluntary chapter 11 petitions on Oct. 11, 2007 (Bankr. N.D. Ill. Case Nos. 07-18768 and 07-18769). Mark K. Thomas, Esq., Brian I. Swett, Esq., Jeremy T. Stillings, Esq., Myja K. Kjaer, Esq., at Winston & Strawn LLP, represent the Debtors. Kurtzman Carson Consultants LLC serve as their notice, claims and balloting agent. The Official Committee of Unsecured Creditors has selected Jeffrey N. Pomerantz, Esq., and Jeffrey W. Dulberg, Esq., at Pachulski Stang Ziehl & Jones LLP, as its counsel. JED OIL: Alberta Court Extends CCAA Stay Until Feb. 17, 2009 ------------------------------------------------------------ The Court of Queen's Bench of Alberta has extended the "Stay Period" of JED Oil Inc.'s initial order for its creditor protection status under the Companies' Creditors Protection Act from Dec. 15, 2008, to Feb. 17, 2009. The Court also approved the asset sale by the company and its subsidiaries of non-core interests in the Ferrier and Wizard Lake areas of Alberta and the Pinedale area of Wyoming, and enhanced the powers of their CCAA Monitor to assist in negotiations of asset sales, to administer their employee retention bonus plan, and to make recommendations for cost cutting measures. JED Oil said it also filed this news release as its third Default Status Report under Canadian National Policy 12-203, pursuant to which it announced that its financial statements for the third quarter ended Sept. 30, 200,8 would not be filed by Nov. 14, 2008. The company's deadline for filings its third quarter financial statements is the end of the CCAA Stay Period, which has been extended to Feb. 17, 2009. The company reports that since announcing the original Notice of Default on Nov. 5, 2008, and filing its first and second Default Status Reports on Nov. 19, and Dec. 3, 2008, respectively, there have not been any additional material changes to the information contained therein other than the extension of the CCAA Stay Period; nor any failure by the company to fulfill its intentions as stated therein, and there are no additional defaults or anticipated defaults subsequent to such announcement. The company said it intends to file its next Default Status Report on Wednesday, Dec. 31, 2008. About JED Oil JED Oil Inc. (AMEX: JDO) -- http://www.jedoil.com/-- is an independent energy company that explores, develops, and produces natural gas, crude oil, and natural gas liquids in Canada and the United States. As of Dec. 31, 2007, it had total proved reserves of 3,035,000 of barrels of oil equivalent. The company was founded in 2003 and is headquartered in Didsbury, Canada As reported in the Troubled company Reporter on June 5, 2008, JED Oil Inc.'s consolidated balance sheet at March 31, 2008, showed $90.5 million in total assets, $76.4 million in total liabilities, and $28.5 million in convertible redeemable preferred shares, resulting in a $14.4 million total stockholders' deficit. At March 31, 2008, the company's consolidated balance sheet also showed strained liquidity with $15.2 million in total current assets available to pay $72.0 million in total current liabilities. As reported in the Troubled Company Reporter on Aug. 27, 2008, JED Oil Inc. and its subsidiaries, JED Production Inc., and JED Oil (USA) Inc. have obtained creditor protection under the Companies' Creditors Arrangement Act (Canada) pursuant to an Order obtained on Aug. 13, 2008, from the Court of Queen's Bench of Alberta, Judicial District of Calgary. JOHNS MANVILLE: Travelers Appeal Goes to Supreme Court ------------------------------------------------------ Bill Rochelle of Bloomberg News reports that the U.S. Supreme Court agreed to decide whether a confirmed Chapter 11 plan dealing with asbestos claims can give insurance companies releases from all claims. According to Mr. Rochelle, by agreeing to hear the Manville appeal, the Supreme Court will have an opportunity to rule on a core issue in asbestos and non-asbestos bankruptcy cases where Chapter 11 plans include provisions shutting off suits against third parties. The 2nd Circuit opinion, Mr. Rochelle notes, included a notably brief analysis of "related to" bankruptcy jurisdiction. The opinion also included little analysis of Section 524 of the Bankruptcy Code, the provision giving bankruptcy courts special powers to deal with asbestos claims. As reported by the Troubled Company Reporter on March 11, 2008, the United States Court of Appeals for the Second Circuit held that a lower court lacked subject matter jurisdiction to enjoin claims against Travelers Casualty and Surety Company and its affiliates that were predicated, as a matter of state law, on Travelers' alleged misconduct, and were unrelated to Johns- Manville Corp. insurance policy proceeds and the "res" of the Manville estate. Circuit Judges Guido Calabresi, Sonia Sotomayor and Richard C. Wesley, in a 28-page opinion, vacated an order by the U.S. District Court for the Southern District of New York affirming a 2004 decision by the U.S. Bankruptcy Court for the Southern District of New York approving settlements entered into by Travelers. Direct Action Lawsuits Travelers served as Manville's primary insurer from 1947 through 1976. Travelers paid nearly $80,000,000 into the bankruptcy estate -- in addition to $20,000,000 already paid in litigation expenses on behalf of Manville -- in exchange for a "full and final release of Manville-related claims." Travelers' settlement, like those of other Manville insurers, was predicated upon the bankruptcy court issuing an injunction that barred suits against Manville's insurers -- including Travelers -- and directed litigation by potential claimants instead against the Manville Personal Injury Settlement Trust. The injunction -- embodied in a 1986 order confirming Manville's plan of reorganization and a separate 1986 Insurance Settlement Order -- channeled to the Manville Trust any and all claims that were based on, arose out of, or related to Manville's liability insurance policies. The Confirmation Order enjoined "all persons" from commencing any action against any of the Settling Insurance Companies "for the purpose of, directly or indirectly, collecting, recovering or receiving payment of, on or with respect to any Claim . . . or Other Asbestos Obligation. . . ." Undeterred by the 1986 orders, various groups of plaintiffs sued Travelers and other insurers in several states based on statutory regulation of insurance practices and common law theories. The statutory claimants assert the rights of individuals who are dissatisfied with the settlements they received after negotiating with Travelers acting on behalf of Manville, or who declined to file personal injury suits against Manville because Travelers allegedly suppressed information about asbestos hazards and intentionally propagated an allegedly-fraudulent "state of the art" defense to frustrate the claimants' rights. The plaintiffs allege that Travelers acquired knowledge about the dangers of asbestos through early asbestosis claims from as far back as the 1950s, "recognized the potential for future escalation of asbestos litigation and . . . influence[d] Manville's purported failure to disclose knowledge about asbestos hazards." The common law claimants assert that Travelers violated alleged duties to disclose certain asbestos-related information it learned from Manville during Travelers' long tenure as Manville's primary insurer. Travelers Settlement In June 2002, Travelers asked the Bankruptcy Court to enjoin 26 independent actions pending in Louisiana, Massachusetts, Texas, and West Virginia state courts pursuant to the 1986 orders. After holding a series of hearings, the Bankruptcy Court referred the matter to mediation and appointed the Honorable Mario M. Cuomo, former Governor of the state of New York, as mediator. Three classes of plaintiffs settled with Travelers. The settlements, which totaled almost $500,000,000, were conditioned upon the Bankruptcy Court's entry of an order clarifying that the Direct Action lawsuits are, and have always been, prohibited by the 1986 orders. Bankruptcy Court Judge Burton Lifland, who oversees the Johns Manville cases, in August 2004 approved the Settlement Agreement and entered a clarfying order specifying that the Direct Action lawsuits against Travelers were barred by the 1986 orders. The District Court affirmed the Bankruptcy Court's findings of fact and conclusions of law, calling the Direct Action Claims as "creatively pleaded attempts to collect indirectly against the Manville insurance policies." The District Court concluded that "barring these claims was a proper exercise of jurisdiction." Second Circuit Appeal Chubb Indemnity Insurance Company and a group of asbestos personal injury claimants elevated the matter to the Second Circuit, among others, arguing that the Bankruptcy Court was without jurisdiction to enjoin third-party non-debtor suits against Travelers. The Appellants argued that the Bankruptcy Court failed to properly distinguish between (a) claims that seek to recover directly from Travelers for Travelers' separate acts; and true Direct Action suits that seek to recover from an insurer contractually obligated to indemnify Manville for its misconduct. Travelers argued that the Bankruptcy Court was merely enforcing its prior order. The Second Circuit said the case concerns the outer reaches of a bankruptcy court's jurisdiction. "[W]hile there is no doubt that the bankruptcy court had jurisdiction to clarify its prior orders, that clarification cannot be used as a predicate to enjoin claims over which it had no jurisdiction," the Second Circuit said in its decision dated Feb. 15, 2008. The Second Circuit held that the lower courts appeared to view the jurisdictional inquiry as a factual one: if the direct actions "arose out of" or are "related to" the Manville-Travelers relationship, then the court had jurisdiction. The Second Circuit, however, noted that factual determination was only half of the equation, and that the nature and extent of Travelers' duty to the Direct Action plaintiffs is a function of state law. Neither the District Court nor the Bankruptcy Court looked to the laws of the states where the claims arose to determine if indeed Travelers did have an independent legal duty in its dealing with plaintiffs, notwithstanding the factual background in which the duty arose, the Second Circuit said. The Second Circuit remanded the case for the Bankruptcy Court to examine whether, in light of the appellate court's opinion, it had jurisdiction to enjoin claims against Travelers. Travelers has asserted that if any portion of the Bankruptcy Court's clarifying order is vacated then all of the relevant settlements will terminate. The Second Circuit clarified that it is not offering any opinion on the matter and will leave it to the settling parties, with the aid of the Bankruptcy Court, to determine the status of their settlements. Manville was, by most sources, the largest manufacturer of asbestos-containing products and the largest supplier of raw asbestos in the United States from the 1920s until the 1970s. Manville sold raw asbestos to manufacturers of asbestos-based products in 58 countries and distributed its own asbestos-based products "across the entire spectrum of industries and employment categories subject to asbestos exposure." As a result of studies linking asbestos with respiratory disease, Manville became the target of a growing number of products liability lawsuits in the 1960s and 1970s. Buckling under the weight of its asbestos liability, Manville filed for Chapter 11 protection on August 26, 1982, before Judge Burton Lifland. To avoid the uncertainty of insurance litigation and to fund its plan of reorganization, Manville sought to settle its insurance claims. Manville obtained in excess of $850,000,000 from settlements with its insurers. The U.S. Bankruptcy Court for the Southern District of New York entered an order confirming the Debtors' Second Amended and Restated Plan of Reorganization on Dec. 22, 1986. JP MORGAN COMMERCIAL: Fitch Holds 'C/DR5' Rating on Class J Certs. ------------------------------------------------------------------ Fitch Ratings affirms and assigns Rating Outlooks for J.P. Morgan Commercial Mortgage Finance Corp.'s mortgage pass-through certificates, series 1999-C8: -- $117.2 million class A-2 at 'AAA'; Outlook Stable; -- Interest-only class X at 'AAA'; Outlook Stable; -- $36.6 million class B at 'AAA'; Outlook Stable; -- $32.9 million class C at 'AAA'; Outlook Stable; -- $14.6 million class D at 'AAA'; Outlook Stable; -- $25.6 million class E at 'AAA'; Outlook Stable; -- $11 million class F at 'AAA'; Outlook Stable; -- $16.5 million class G at 'A-'; Outlook Stable; -- $20.1 million class H at 'B'; Outlook Negative; -- $14.8 million class J at 'C/DR5'. Classes K and NR have been reduced to zero due to realized losses. Class A-1 has paid in full. Affirmations are due to sufficient credit enhancement as a result of amortization, loan repayment, and defeasance. As of the November 2008 distribution date, the pool's aggregate performance has been reduced 60.5% to $289.3 million from $731.5 million. Rating Outlooks reflect the likely direction of any rating changes over the next one to two years. Approximately 33.4% of the pool has defeased, including five of the top 10 loans. Of the pool, 78% is scheduled to mature in the next twelve months; however, 35% of these maturing loans have defeased. There are currently seven specially serviced loans (16.2%), including the largest remaining loan. The largest remaining loan (7.5%) is backed by a 692-unit multifamily property located in Rolling Meadows, IL, a suburb of Chicago. The loan is currently 30 days delinquent and has had a history of delinquency throughout the life of the loan. The property is currently listed for sale. At this time, Fitch does not expect losses to the trust. The second largest specially serviced loan (2.1%) is backed by a 121,639 square foot office property located in Kansas City, MO. The loan was transferred on June 2, 2008 due to imminent default. The special servicer is pursuing foreclosure and expects to take title by March 2009. Losses are possible. Fitch has identified 18 loans (32.1%) as Fitch Loans of Concern. These include specially serviced loans, loans with DSCRs below 1.0 times, loans with declining occupancies, and loans with other performance issues. The largest non-specially serviced Loan of Concern is collateralized by an office in Seattle, Washington. A major tenant occupying approximately 31% of the net rentable area will vacate in February 2009. The space is currently being marketed. KANSAS SOUTHERN: Moody's Rates Proposed Sr. Unsec. Notes at B2 -------------------------------------------------------------- Moody's Investors Service has assigned a B2 rating to Kansas City Southern Railway Company's proposed senior unsecured notes due 2013. Parent company The Kansas City Southern's Corporate Family Rating was affirmed at B1. The rating outlook is stable. On December 15, 20008, KCS and KCSR announced plans to commence an offering of $175 million of Senior Notes due 2013. The company intends to use the proceeds from these notes to repurchase $200 million aggregate principal amount of its 7-1/2% Senior Notes due 2009 and to pay the fees and expenses associated with such repurchase. Kansas City Southern's B1 rating reflects on-going improvement in the company's railroad operations, stemming largely from high, but appropriate levels of investment in both its equipment and infrastructure over the past several years. Revenue growth, service levels, and profitability have improved materially over recent years, and are expected to be sustained at historically strong levels through 2009 despite volume weakness affecting the entire industry. However, as a result of the aggressive capital spending program, KCS carries significant debt balances, and will likely continue to do so for the foreseeable future. Credit metrics, which are somewhat strong for the B1 rating, are expected to remain stable for the near term. The B2 rating on KCSR's senior unsecured notes, one notch below the corporate family rating, reflects the junior priority of this class of debt to approximately $400 million of senior secured debt obligations. The stable outlook reflects Moody's expectations that the company will be able to report modest sales growth through 2009, despite weakness in the U.S. economy in general, and that the current pricing environment will hold up through this period, resulting in stable yields. Moody's expects the company's operating ratio to remain at or below 80% for the near term. Also, although debt is expected to increase over this period, credit metrics are expected to remain stable as the result of sustained operating profitability and modest growth. Ratings would face downward adjustment if the company is unsuccessful at redeeming substantially all of the near term maturities, regardless of the outcome of the current notes offering. The ratings could also be pressured down following any unexpected shock to the rail system in either the U.S. or in Mexico, or loss of fluidity determined by a decline in velocity to below 20 mph. Deterioration of credit metrics to levels such as debt to EBITDA of greater than 5 times or EBIT to interest coverage of less than 1.8 times would also warrant a lower rating. Conversely, the rating could be raised following consistently strong free cash flow at both KCSR and KCSM, with an Operating Ratio below 80% for a sustained period, and debt to EBITDA (using Moody's standard adjustments) below 3.8 times at KCSR and KCSM. The last rating action on KCS and KCSR was an upgrade of the company's Corporate Family Rating to B1 on May 19, 2008. Kansas City Southern's ratings were assigned by evaluating factors Moody's believes are relevant to the credit profile of the issuer, such as i) the business risk and competitive position of the company versus others within its industry, ii) the capital structure and financial risk of the company, iii) the projected performance of the company over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of KCS's core industry and KCS's and KCSR's ratings are believed to be comparable to those of other issuers of similar credit risk. Kansas City Southern operates a Class I railway in the central U.S. and, through its wholly-owned subsidiary Kansas City Southern de Mexico, S.A. de C.V., owns the concession to operate Mexico's northeastern railroad. KCS acquired full ownership of KCSM (formerly TFM, S.A. de C.V.) through a series of transactions during 2005 from what had been a large minority-ownership position. KANSAS SOUTHERN: S&P Assigns 'BB-' Rating on $190MM Senior Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB-' rating to Kansas City Southern Railway Co.'s proposed $190 million senior notes due 2013. The issue-level rating on the notes is one notch higher than the corporate credit ratings on KCSR and its parent, Kansas City Southern (both entities rated B+/Developing/--). "We assigned a '2' recovery rating to this debt, indicating that lenders can expect substantial (70%-90%) recovery in the event of a payment default. The company will use proceeds from the debt issue, along with other borrowings, to repurchase the $200 million 7.5% senior notes due 2009," S&P said. Ratings on Kansas City Southern reflect its highly leveraged capital structure, substantial capital spending requirements, and challenges associated with its integration of Kansas City Southern de Mexico S. de R.L. de C.V., the Mexican railroad company it acquired in April 2005. Offsetting these risks to some extent are the favorable characteristics of the U.S. freight railroad industry and the company's strategically located rail network. According to S&P: "Kansas City Southern has been spending a significant amount on capital investments over the past few years, and this has caused debt levels to remain high and has constrained liquidity at times. Still, yield and efficiency improvements have led to somewhat improved operating performance and this has translated into improved financial measures. Funds from operations (FFO) to debt (adjusted for operating leases) is now in the upper-teens percentage area (versus 8% in 2005), and adjusted debt to capital is in the mid-50% area (compared with the low-60% area in 2005). Although debt levels are likely to remain relatively unchanged because of ongoing investments in infrastructure and equipment, we expect further improvement in operating metrics over time as the company benefits from some new revenue opportunities, a continuing favorable pricing environment, and further efficiency gains. "However, the slowing U.S. economy will likely temper improvement over the short term. Standard & Poor's expects to revise our rating outlook on Kansas City Southern to stable from developing upon the successful completion of the proposed debt offering. While the refinancing will lessen our near-term concerns regarding liquidity, thus making it less likely that we will lower the rating, the refinancing does not increase liquidity either. That, and the worsening economic picture, makes it less likely that ratings will be upgraded over the near term." Rating List Kansas City Southern Kansas City Southern Railway Co. Corporate Credit Rating B+/Developing/-- Rating Assigned Kansas City Southern Railway co. $190 Mil. Senior Notes Due 2013 BB- Recovery Rating 2 KAUPTHING BANK: Court to Hear Chapter 15 Petition on January 21 --------------------------------------------------------------- On Nov. 30, 2008, Olafur Gardasson, assistant for Kaupthing Bank hf., in a proceeding under Act No. 21/1991, pending before the Reykjavik District Court, and foreign representative of the Debtor, filed a petition under chapter 15 of tigle 11 of the United States Code in the United States Bankruptcy Court for the Southern District of New York commencing the Debtor's chapter 15 case ancillary to the Icelandic Proceeding and seeking recognition for the Icelandic Proceeding as a "foreign main proceeding" under the Bankruptcy Code and relief in aid of the Icelandic Proceeding. Pursuant to the Order Scheduling Hearing on Recognition of Foreign Main Proceeding and Specifying the Form and Manner of Service of Notice of Chapter 15 Petition and Recognition Hearing, dated December 1, 2008, the Bankruptcy Court has scheduled a hearing to consider the Foreign Representative's request for recognition of the Icelandic Proceeding as a "foreign main proceeding" pursuant to sections 1517 of the U.S. Bankruptcy Code and related relief on January 21, 2009 at 10:00 a.m. (Eastern time) before the Honorable Martin Glenn in Room 501 of the United States Bankruptcy Court, Alexander Hamilton Custom House, One Bowling Green, New York, NY 10004-1408. Any party in interest wishing to submit a response or answer to the relief requested by the Foreign Representative must do pursuant to the U.S. Bankruptcy Code and the Local and Federal Rules of Bankruptcy Procedure, including, without limitation, Rule 1011 of the Federal Rules of Bankruptcy Procedure, in writing and setting for the bases therefore and the nature and extent of the respondent's interests in the Debtor's assets, and such response or answer must be filed with the Office of the Clerk of the Court, Alexander Hamilton Custom House, One Bowling Green, New York, NY10004-1408, and served on the attorneys for the Foreign Representative Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York, 10153 U.S.A., Attn: Marcia L. Goldstein, Gary T. Holtzer and Sharon J. Richardson, Esquires, so as to be received by them no later than 5:00 p.m. (Eastern time) on January 8, 2009. Replies to any such responses or answers shall be filed with the Court with a copy to Chambers, and served upon the responding parties so as to be received no later than 5:00 p.m. (Eastern time) on January 15, 2009. All parties in interest opposed to the Foreign Representative's request for relief must appear at the Hearing at the time and place set forth above. The hearing may be adjourned from time to time without further notice other than an announcement in open court at the Hearing of the adjourned date or dates or any further adjourned hearing. If no response or objection is timely filed and served as provided above, the Bankruptcy Court may grant the recognition and relief requested by the Foreign Representative without further notice or hearing. About Kaupthing Bank Headquarted in Reykjavik, Iceland, Kaupthing Bank -- http://www.kaupthing.com-- is engaged in the provision of financial services, such as private banking, asset management, pension services, brokerage services, investment banking, as well as corporate and retail banking. The Bank's offer is targeted at companies, institutional investors and individuals. The Bank is operational in thirteen countries, including Luxembourg, Switzerland, the Nordic countries, the United Kingdom and the United States. The main subsidiaries include Kaupthing Singer & Friedlander and FIH Erhvervsbank. * * * As reported in the Troubled Company Reporter-Europe on October 13, 2008, Fitch Ratings downgraded Kaupthing Bank hf.'s Long-term Issuer Default rating to 'D' from 'CCC' and removed it from Rating Watch Evolving. This follows the announcement that Kaupthing is now subject to similar arrangements as its two Icelandic peers, Glitnir Banki and Landsbanki Islands, with the Icelandic authorities effectively seizing control of the bank. At the same time, Moody's Investors Service downgraded the bank financial strength rating (BFSR) of Kaupthing Bank hf to E from D+, its long-term deposit ratings to Caa1 from Baa3, the long-term senior debt ratings to Caa2 from Ba1. In addition, Moody's downgraded the bank's subordinated debt to C from Ba2 and its preferred stock to C from B1. The bank's short-term rating was downgraded to Not-Prime from P-3. Moody's is maintaining Kaupthing's long-term deposit ratings, the long-term senior debt ratings and its BFSR on review for further possible downgrade. KB TOYS: U.S. Trustee Forms Seven-Member Creditors Committee ------------------------------------------------------------ Roberta A. DeAngelis, the United States Trustee for Region 3, appointed seven creditors to serve on an Official Committee of Unsecured Creditors for KB Toys Inc. and its debtor-affiliates. The creditors committee members are: 1) Li & Fung Toy Island Mfr. Attn: Martin Leder 1359 Broadway New York, NY 10018 Tel: (646) 839-7007 Fax: (646) 839-7476 2) Mattel, Inc. Attn: Kathleen Simpson-Taylor 333 Continental Blvd. El Segundo, CA 90245 Tel: (310) 252-4223 Fax: (310) 252-5119 3) Hasbro, Inc. Attn: Frada Salo 200 Narragansett Park Drive Pawtucket, RI 02862 Tel: (401) 431-8102 Fax: (401) 431-8586 4) JJ Bean, Inc. Attn: Jordan Sadoff 1546 Bourbon Pkwy. Streamwood, IL 60107 Tel: (630) 837-9974 Fax: (866) 861-2895 5) GGP Limited Partnership Attn: Julie Minnick Bowden 110 North Wacker Drive Chicago, IL 60606 Tel: (312) 960-2707 Fax: (312) 442-6374 6) Simon Property Group, Inc. Attn: Ronald M. Tucker 225 W. Washington Street, Indianapolis, IN 46204 Tel: (317) 263-2346 Fax: (317) 263-7901 7) Big Lots, Inc. Attn: Charles W. Haubiel II 300 Phillipi Road Columbus, OH 43228 Tel: (614) 278-6767 Fax: (614) 278-3319 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtor's expense. They may investigate the Debtor's business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual Chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtor is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. About KB Toys Headquartered in Pittsfield, Massachusetts, KB Toys, Inc. -- http://www.kbtoys.com-- operates a chain of retail toy stores. On Jan. 14, 2008, the Debtor and 69 of its affiliates filed for protection under Chapter 11 of the Bankruptcy Code, which were administratively consolidated under Case No. 04-10120. Two of the 200 bankruptcy cases remain open, KB Toys Inc. and KB Toy of Massachusetts Inc. In connection with the emergence of KB Toys from bankruptcy in August 2005, and the subsequent organizational restructuring, the assets and operations of may of these prior debtors were transferred among then existing debtor entities and consolidated with KB Toys Group. Furthermore, most of the entities involved were either dissolved or were merged into surviving entities, and several of them changed their names. As a result, nine Debtors and four inactive special purpose units which are not debtors. The company and eight of its affiliates filed for Chapter 11 on December 11, 2008 (Bankr. D. Del. Lead Case No. 08-13269). Joel A. Waite, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. The Debtors proposed Wilmer Cutler Pickering Hale and Dorr LLP as their co-counsel, FTI Consulting Inc. as financial and restructuring advisor, and Epiq Bankruptcy Solutions LLC as claims and noticing agent. When the Debtors filed for protection from their creditors, they listed assets and debts between $100 million to $500 million each. LAGUNA DEVELOPMENT: Industry to Remain Under Pressure in 2009 ------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) LANDAMERICA FIN'L: Stewart Balks at Sale; Says It Has "Best" Bid ---------------------------------------------------------------- Stewart Information Services Corporation said the sale of LandAmerica Financial Group Inc.'s two principal title insurance underwriters, Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation, should be denied, asserting that it had the highest and best offer for those units. As reported by yesterday's Troubled Company Reporter, notwithstanding objections by various parties, including Stewart, the United States Bankruptcy Court for the Eastern District of Virginia approved Fidelity National Financial Inc.'s acquisition of Commonwealth and Lawyers Title. Stewart's "Highest and Best" Offer Henry P. Long, III, Esq., at, Hunton & Williams LLP, Richmond, Virginia, noted that Stewart Information is offering a $5 million cash payment, the forgiveness of $134.1 million of intercompany debt, and the ability of the estate's creditors to participate in the success of the purchased companies via a substantial $20 million equity stake in Stewart Information at a substantial discount to tangible book. Stewart Information's proposal is the highest and best offer for the Assets, he maintained. By comparison, Mr. Long said, Stewart would respectfully suggest that Fidelity's competing offer of about $298 million, though impressive in the nominal magnitude of the compensation, must nevertheless be deeply discounted on a real basis given the tremendous regulatory hurdles facing its consummation. He maintained that there is no certainty that, even if all of the contingency hurdles in Fidelity's Stock Purchase Agreement were met, the transaction as proposed in the SPA would be achieved as the value of the asset would then be much lower. Stewart, Old Republic Want Market Test Stewart asserted that it is uncommon for a debtor to seek to conduct a sale of a significant business unit without at least establishing some form of bid and auction protocols so that competing bidders have some degree of assurance that their bids will be duly considered and presented to the Court, creditors and other and parties-in-interest. The Court should order an expedited procedure for identifying all potential purchasers and establish a bid procedures process for the submission and evaluation of offers for the Underwriters Assets, Old Republic International Corporation contended. Old Republic and its subsidiaries said they weren't contacted by LFG with respect to the Underwriters sale. Old Republic currently holds about 9.9% of LFG's outstanding common stock. Old Republic warned that Fidelity's acquisition of the Underwriters would result in Fidelity holding an unacceptably large share of the national title insurance market, which would directly threaten the competitive process. Fidelity's aggregate market share would total approximately 45%. Buyer: Stewart Did Not Make Binding Offer Augustus C. Epps, Jr., Esq., at Christian & Barton, LLP, in Richmond Virginia, asserted, on FNF's behalf, that while Stewart and Old Republic, as potential over-bidders, objected to the Sale Motion, they do not have a meaningful stake in the outcome of the Debtors' bankruptcy cases and therefore lack standing to object to the Sale Motion. Moreover, he pointed out, despite having conducted prior due diligence, neither Stewart nor Old Republic has made a binding offer to purchase the Property. Mr. Epps noted that the property that is the subject of the Sale Motion is deteriorating in value by the day. He said FNF has no interest in purchasing the Property unless it can consummate the sale by December 22, 2008. He averred that FNF's offer is vastly superior to Stewart's offer, in that FNF has offered $198 million in cash as opposed to Stewart's offer of $5 million in cash; and FNF's offer as a whole exceeds that of Stewart by more than $200 million. Court Denies Objections Aside from the two potential buyers, other key stakeholders, including the Official Committee of Unsecured Creditors of LandAmerica Financial Group, Inc., objected to the sale. On behalf of the Committee, Christopher L. Perkins, Esq., at LeClairRyan, in Richmond Virginia, argued that the sale process is fundamentally flawed and that there are simply too many important, unanswered questions to allow the proposed sale to be approved without considerable scrutiny. He noted, among other things, that no evidence has been presented that any effort has been made to seek out other potential purchasers of the stock of the Underwriters. The Creditors Committee, according to Bloomberg News' Bill Rochelle, has request a seven- to 10-day delay in the sale of the title companies. In a hearing held December 16, 2008, Judge Heunnekens, however, opined that Debtors LandAmerica Financial Group, and affiliate LandAmerica 1031 Exchange Services, Inc., exercised their business judgment and approved the sale of Commonwealth Land Title Insurance Company and Lawyers Title Insurance Company to Fidelity National Title Insurance Company pursuant to an amended stock purchase agreement. In response to Stewart's objection and offer, LFG said it was baffled why Stewart Information didn't a draft agreement before the Court hearing on the proposed sale. LFG maintained that it actively pursued various strategic alternatives, but no other meaningful offers have emerged. The Debtors reiterated that they don't have a choice, and must do everything within their control to sell the Underwriters' stock without delay. They averred the FNF's offer remain the best and only viable offer they can work with. LFG disclosed in an 8-K filing with the Securities and Exchange Commission, that it entered into an amended and restated Stock Purchase Agreement with Fidelity National Title Insurance Company and Chicago Title Insurance Company on December 12, 2008. LandAmerica Executive Vice President and Chief Legal Officer Michelle H. Gluck relates that under the revised terms, FNTIC and Fidelity National Financial Inc. will acquire (1) the capital stock of Lawyers Title Insurance Company from LandAmerica, and (2) Chicago Title Insurance will acquire the capital stock of Commonwealth Land Title Insurance Company from LandAmerica for an aggregate purchase price of: -- $181,762,521, subject to potential reduction; -- shares of FNF common stock equal to $50,000,000 divided by the greater of $14 or the closing price of FNF common stock on the New York Stock Exchange for the trading day prior to the closing date; and -- a subordinated promissory note issued by Fidelity in an initial principal amount equal to $50,000,000. In addition, subject to the closing conditions set forth in the Purchase Agreement, FNTIC will acquire the capital stock of United Capital Title Insurance Company from an indirect subsidiary of LandAmerica for a purchase price equal to a statutory measure of the net worth of United Capital Title as of the closing. The Amended Purchase Agreement also provide for these changes: (a) If the closing conditions under the Purchase Agreement have been satisfied except for California state insurance approval with respect to the United Capital Sale and the completion of any rehabilitation proceedings with respect to United Capital Title, the Sale will close and the closing of the United Capital Sale will be deferred until the conditions relating to United Capital are either satisfied or waived. (b) The Purchase Agreement may be terminated by FNTIC or Chicago Title Insurance if the closing of the Sale has not occurred by December 22, 2008. (c) The Purchase Agreement no longer contemplates entry into an escrow agreement with respect to LandAmerica's indemnification obligations under the Purchase Agreement and instead, the indemnification obligations, if any, will be funded by a reduction in the principal amount of the FNF Note. About LandAmerica Financial LandAmerica Financial Group, Inc. is a leading provider of real estate transaction services with offices nationwide and a vast network of active agents. LandAmerica serves its agent, residential, commercial and lender customers throughout the United States, Mexico, Canada, the Caribbean, Latin America, Europe and Asia. LandAmerica Financial Group and its affiliate LandAmerica 1031 Exchange Services, Inc. filed for Chapter 11 protection Nov. 26, 2008 (Bankr. E. D. Virginia, Lead Case No. 08-35994). Dion W. Hayes, Esq., and John H. Maddock III, Esq., at McGuireWoods LLP, are the Debtors' bankruptcy counsel. In its bankruptcy petition, LFG listed total assets of $3,325,100,000, and total debts of $2,839,800,000 as of Sept. 30, 2008. (LandAmerica Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). LANDAMERICA FINANCIAL: Taps Zolfo Cooper's J. Mitchell as CRO ------------------------------------------------------------- Debtor LandAmerica Financial Group, Inc., sought and obtained authority from the U.S. Bankruptcy Court for the Eastern District of Virginia to enter into a services agreement with Jonathan A. Mitchell and Zolfo Cooper Management, LLC. Pursuant to the Agreement, the Debtor will appoint Mr. Mitchell, a senior managing director of Zolfo Cooper, as its Chief Restructuring Officer and additional individuals provided by Zolfo Cooper that will perform other services required by Zolfo Cooper and Mr. Mitchell nunc pro tunc to the Petition Date. Pursuant to an engagement letter, the Debtor engaged Zolfo Cooper on November 22, 2008, to: (i) advise and assist management in forecasting, planning, controlling and other aspects of managing cash of the Debtor; (ii) advise and assist it regarding contingency planning for a Chapter 11 proceeding, if required; (iii) advise and assist management in developing restructuring alternatives; (iv) advise and assist management in negotiating and implementing the Debtor's selected capital restructuring plan with various creditors, as necessary; and (v) provide other services as the Debtor requests. Zolfo Cooper has provided services as of the date of the engagement letter up to immediately prior to the Debtors' bankruptcy filing. Pursuant to a related Services Agreement dated November 26, 2008, among the parties, Zolfo Cooper and Mr. Mitchell will be authorized to make decisions with respect to all aspects of the management and operation of the Debtor's business, in a manner they deem necessary or appropriate under the direction of the Board in a manner consistent with the business judgment rule and the provisions of local law and the Bankruptcy Code. Zolfo Cooper, Mr. Mitchell and the Associate Directors, however, will not have any authority to make decisions with respect to hiring or terminating officers, executing transactions, or otherwise committing the Debtor or its resources other than in the ordinary course of business. Zolfo Cooper and Mr. Mitchell will keep the Debtor's Board of Directors fully apprised of their findings, plans and activities. The services of Zolfo Cooper and Mr. Mitch will be (a) provided to the Debtor at its request; (b) appropriately directed by the Debtor so as to avoid duplicative efforts among the professionals retained in the case; and (c) performed in accordance with applicable standards of the accounting profession. Consistent with the terms of the Agreement, the Debtor has provided a $300,000 security retainer to Zolfo Cooper, which Zolfo Cooper will hold throughout its engagement. The retainer secures final payment of invoices for services rendered to be rendered by the firm. As of the Petition Date, Zolfo Cooper did not hold a prepetition claim against the Debtor for services rendered. Zolfo Cooper, Mr. Mitchell and the Associate Directors will be paid for their services according to these hourly rates: Professional Hourly Rate ------------ ----------- Managing Directors $695 - $720 Professional Staff $200 - $665 Support Personnel $45 - $225 In addition to the hourly fees, Zolfo Cooper will also be entitled to be paid a contingent fee based upon the cash proceeds generated from the sale of all or a portion of the Debtor's assets: (i) The Debtor will pay Zolfo Cooper 2% of the Proceeds up to $50 million but less than $500,000. (ii) The Debtor will pay Zolfo Cooper 1.5% of the Proceeds between $50 million to $100 million. (iii) The Debtor will pay Zolfo Cooper 1.0% of Proceeds over $100 million. A contingent fee will not be payable to Zolfo Cooper for Proceeds resulting from the sale of the Debtor's interest in Centennial Bank or the regulated insurance subsidiaries. The Debtor will also reimburse Zolfo Cooper's, Mr. Mitchell's and Associate Directors' reasonable out-of-pocket expenses, including costs of travel, reproduction, legal counsel, any applicable state sales or excise tax and other direct expenses. Because Zolfo Cooper and Mr. Mitchell are not being employed as professionals under Section 327 of the Bankruptcy Code, they will not be submitting fee applications pursuant to Sections 330 and 331. However, on or about the 15th day of each month, Zolfo Cooper will file and serve a report, which outlines the compensation and reimbursable expenses set forth in its invoice from the prior month. The Debtor will indemnify and hold harmless Mr. Mitchell, the Associate Directors, and Zolfo Cooper against any losses, claims, damages, or liabilities arising out of Zolfo Cooper and Mr. Mitchell's engagement with the Debtor. Mr. Mitchell, a senior managing director of Zolfo Cooper, says he has been able to ascertain after due inquiry that none of Zolfo Cooper's managing directors or employees is related to the Debtor, its creditors, other parties-in-interest, the U.S. Trustee or anyone employed in the U.S. Trustee's office; or represents any interest adverse to any party except that Zolfo Cooper is connected to the Debtor. Mr. Mitchell adds that to the extent Zolfo Cooper or its affiliates may represent or has represented certain of the Debtor's creditors or other parties-in-interest, that representation has been in matters unrelated to the Debtor's Chapter 11 case. Committees Objected Before the Court entered its ruling, the Official Committee of Unsecured Creditors of LandAmerica Financial Group, Inc., and LandAmerica 1031 Exchange Services, Inc., informed the Court of their position on the Zolfo Cooper and Jonathan Mitchell retention. The LES Committee and the LFG Committee complained that the Contingent Fee to be paid to Zolfo Cooper and Mr. Mitchell is unreasonable and unjustified under the facts and circumstances of the Debtors' cases. Mary A. House, Esq., at Akin Gump Strauss Hauer & Feld LLP, Dallas, Texas, reminded the Court that The Committees noted that the Zolfo Cooper Retention provides that the Contingent Fee will not apply to the sale of LFG's interest in Centennial Bank and the "regulated insurance subsidiaries"; however those subsidiaries are not defined. The Committees opposed the Application to the extent the Contingent Fee applies to payment of fees for services which fail to benefit a debtor's estate. Moreover, the payment of a set contingent fee for proceeds up to $50 million is simply not reasonable, the Committees argued, as it may result in Zolfo Cooper receiving amounts disproportionately large compared to the size of the cash proceeds. They added that LFG has provided no evidence that Zolfo Cooper was instrumental in the postpetition Sale Motion process. The LES Committee is also concerned that although only LFG is seeking to retain Zolfo Cooper, the firm may ultimately seek compensation for services allegedly provided to LES. About LandAmerica Financial LandAmerica Financial Group, Inc. is a leading provider of real estate transaction services with offices nationwide and a vast network of active agents. LandAmerica serves its agent, residential, commercial and lender customers throughout the United States, Mexico, Canada, the Caribbean, Latin America, Europe and Asia. LandAmerica Financial Group and its affiliate LandAmerica 1031 Exchange Services, Inc. filed for Chapter 11 protection Nov. 26, 2008 (Bankr. E. D. Virginia, Lead Case No. 08-35994). Dion W. Hayes, Esq., and John H. Maddock III, Esq., at McGuireWoods LLP, are the Debtors' bankruptcy counsel. In its bankruptcy petition, LFG listed total assets of $3,325,100,000, and total debts of $2,839,800,000 as of Sept. 30, 2008. (LandAmerica Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). LANDAMERICA FIN'L: Seeks to Remit Segregated Section 1031 Funds --------------------------------------------------------------- Debtor LandAmerica 1031 Exchange Services, Inc., seeks authority from the U.S. Bankruptcy Court for the Eastern District of Virginia to remit in full certain segregated funds pursuant to exchange agreements with customers. LandAmerica 1031 operated as a qualified intermediary under Section 1.1031(k)-1(g)(4) of the Treasury Regulations and Section 1031 of the Internal Revenue Code. Pursuant to Section 1031 of the Tax Code and Treasury Regulations, if a taxpayer adheres to certain guidelines, then all or a portion of the gains from the disposition of business or investment property can be deferred. To qualify for a tax deferral, the taxpayer must structure the transaction as an exchange of one property for another of like kind. This includes a requirement that the taxpayer receive the new like kind property within 180 days after the date on which the taxpayer transferred the relinquished property. LES entered into agreements with its customers whereby it acquired the net proceeds of the sales of relinquished properties in order to facilitate a like-kind exchange. LES entered into two primary types of Exchange Agreements: (i) agreements that require LES to segregate the applicable Exchange Funds; and (b) agreements that do not require segregation. Dion W. Hayes, Esq., at McGuirewoods LLP, in Richmond, Virginia, relates that all of the Exchange Agreements provide that a customer will have no right, title or interest in or to the Exchange Funds or any earnings thereon and that a customer will have no right, power or option to demand, call for, receive, pledge or otherwise obtain the benefits of any Exchanged Funds or any earnings thereon, including interest, if any, earned on the Exchanged Funds except that the balance of the Exchange Funds, if any, held by LES after applying the Exchange Funds in accordance with the Exchange Agreement will be paid to the customer on the Termination Date. None of the Exchange Agreements contains language describing them as an express trust. Mr. Hayes points out that the Segregated Exchange Agreements, however, contain provisions that change characterization of the party that maintains the right, title or interest in or to the Exchange Funds. The provisions, among others, require LES to segregate the applicable Exchange Funds and hold the Segregated Exchange Funds in a segregated bank account until the Termination Date. Moreover, the Segregated Exchange Funds are maintained in separate bank accounts and associated with the applicable customer's name and tax identification number. In this regard, he avers, the strict segregation requirement of the Segregated Exchange Funds prevents LES from using the funds which limitation weighs against including the Segregated Exchange Funds in the property of LES' estate. In fact, at least three customers of LES with Segregated Exchange Funds have filed separately adversary proceedings, he notes. As of the Petition Date, the Exchange Funds maintained by LES are acquired from 450 customers and include 50 Segregated Exchange Agreements with Exchange Funds aggregating $227.5 million maintained in segregated in LES accounts. By this motion, LES seeks the Court's authority to remit in full the Segregated Exchange Funds in accordance with the Exchange Agreements and to perform its related obligations in consideration of the customers' execution of a release, a full- text copy of which is available for free at: http://bankrupt.com/misc/LandAm_SegrExchFundRelease.pdf Mr. Hayes says nearly every day a Termination Date occurs that require LES to transfer exchange funds to customers. He stresses that if the Segregated Exchange Funds are not transferred, the Debtors' estates may be subject to increased damage claims resulting from the failure to consummate a like-kind exchange with the exchange period in Section 1031 of the Tax Code and applicable Treasury Regulations. In addition to claims for the Segregated Exchange Funds themselves, those damage claims may include forfeited down payments, acceleration of income taxes sought to be deferred by the exchange. Holding hearings, filing pleadings and sending notice of each proposed settlement would inhibit LES' timely remittance of the Segregated Exchange Funds, thus contributing to potential damage claims and would otherwise be costly, time consuming and inefficient, he tells the Court. LES further asks the Court to modify the LES Cash Management Order to authorize but not direct LES to transfer the Segregated Exchange Funds in accordance with the Segregated Exchange Agreements. About LandAmerica Financial LandAmerica Financial Group, Inc. is a leading provider of real estate transaction services with offices nationwide and a vast network of active agents. LandAmerica serves its agent, residential, commercial and lender customers throughout the United States, Mexico, Canada, the Caribbean, Latin America, Europe and Asia. LandAmerica Financial Group and its affiliate LandAmerica 1031 Exchange Services, Inc. filed for Chapter 11 protection Nov. 26, 2008 (Bankr. E. D. Virginia, Lead Case No. 08-35994). Dion W. Hayes, Esq., and John H. Maddock III, Esq., at McGuireWoods LLP, are the Debtors' bankruptcy counsel. In its bankruptcy petition, LFG listed total assets of $3,325,100,000, and total debts of $2,839,800,000 as of Sept. 30, 2008. (LandAmerica Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). LANDAMERICA FINANCIAL: Investors Seek to Recover 1301 Funds ----------------------------------------------------------- Several creditors are trying to recover funds they had put up with LandAmerica Financial Group, Inc., in relation to Section 1031 exchanges. According to The Wall Street Journal, the creditors had placed on deposit about $400 million with Debtor LandAmerica 1301 Exchange Services Inc. "to take advantage of a real-estate strategy known as a 1031 exchange." Section 1031 of the Internal Revenue Code permits the seller of a property to use the proceeds of the sale to purchase like kind property without paying capital gains tax on the sale proceeds. The seller has 45 days from the date of a sale of relinquished property to identify like kind replacement property and 180 days from the date of the sale to close on the purchase of the replacement property. To preserve the tax deferral, the seller cannot take the title to the proceeds, and must instead deposit the proceeds with a "qualified intermediary" until such time the seller is ready to close on the replacement property. LandAmerica 1031 served as a "qualified intermediary" pursuant to certain separate 1031 Exchange Agreements with several investors. Under the Agreements, LandAmerica 1031 charges a small fee for its "intermediary" services and in turn, offers a 0.5% to 1% return for holding an investor's funds. The WSJ notes that the Company puts the investors' funds in "higher yielding auction- rate securities backed by federally insured student loans." However, in a letter dated November 24, 2008, LandAmerica 1031 informed investors that it was terminating its operations due to its inability to sell or borrow against the auction-rate securities due to poor state of the nation's securities market. The Company assured investors it has undertaken every effort to avoid the problem. The Company also relayed it will be providing information soon on how the investors can establish claims relating to the 1031 Exchange Funds. Subsequently, LandAmerica sought bankruptcy protection on November 26, 2008, and the investor funds were stayed pursuant to the Bankruptcy Code. The investors are also complaining that LandAmerica 1031 continued to do business and commingled the funds they invested even after the Company disclosed problems with its auction-rate securities, the WSJ related. Among the investor creditors of LandAmerica 1031 are Health Care REIT Inc., Lubexpress Land Company Inc., Lubexpress Operating Company, Inc., Frontier Pepper's Ferry LLC, and Millard Refrigerated Services, Inc. They have initiated complaints against LandAmerica in the U.S. Bankruptcy Court for the Eastern District of Virginia with respect to the 1031 exchanges. Health Care REIT is seeking to recover about $137 million, Millard about $27 million, and Lubexpress about $9 million in Section 1031 Funds. Lawsuits Filed Various investment creditors filed separate complaints to the Court seeking to recover funds they have put up with Debtor LandAmerica 1031 Exchange Services, Inc., in relation to Section 1301 exchanges: * Health Care REIT, Inc., * Lubexpress Land Company Inc., and Lubexpress Operating Company, Inc., * Frontier Pepper's Ferry LLC, and * Millard Refrigerated Services, Inc., * Arbor Oaks I, LLC and Arbor Oaks II, LLC * Chino Spectrum Center, LLC and Chino Wings, LLC * Westminster Peak L.P., Westminster Summit L.P., NMC Summit, LLC, and Tower Summit Colorado, LLC * Bernadette and Benjamin Aiello * Gregg and Hana Opsahl * Haddon Square Partners, L.L.C. * David R. Shepherd and Merriman Valley Limited Liability Co. The Investment Creditors closed on the sale of certain of their properties; and executed Exchange Agreements with LES, wherein LES agreed, in consideration of certain fees, to act as a qualified intermediary to hold the proceeds of the sales and to effectuate Section 1031 tax deferred exchanges on replacement properties. The Creditors have deposited these amounts with respect to the sale proceeds of their assets: Millard $27,820,256 Lubexpress 9,012,188 Arbor Entities 5,373,181 Chino Entities 5,046,281 Westminster Entities 2,300,000 Haddon Square Partners 1,200,000 Frontier 1,200,000 David R. Shepherd/Merriman Valley 822,000 Bernadette/Benjamin Aiello 800,000+ Gregg/Hana Opsahl 584,355 The Creditors have since then found replacement sale transactions and now require LES to release the Sale Proceeds to complete the Section 1031 exchange. The Creditors intend only to transfer legal rights to their deposited Sale Proceeds to LES. The Creditors assert that pursuant to separate Exchange Agreements, they agreed that LES would hold the Sale Proceeds would be held for their benefit. Clearly, the Exchange Agreements provides in part that "[LES] is entering into this exchange agreement solely for the purpose of facilitating taxpayer's exchange of the relinquished property for the replacement property," the Creditors note. Under the Exchange Agreements, the Creditors point out, LES is prohibited from commingling the Sale Proceeds with any other funds not belonging to them. Accordingly, in separate complaints, the Creditors ask the Court to: (a) declare that the Section 1031 Funds are their property and not the Debtors; (b) enjoin LES from expending, transferring, or commingling the Section 1031 Funds; (c) direct LES to immediately return the Sale Proceeds, or, at the Creditors' election, to get a substitute qualified intermediary; and (d) direct LES to make the Funds available on a timely basis for the Creditors' acquisition of replacement properties. About LandAmerica Financial LandAmerica Financial Group, Inc. is a leading provider of real estate transaction services with offices nationwide and a vast network of active agents. LandAmerica serves its agent, residential, commercial and lender customers throughout the United States, Mexico, Canada, the Caribbean, Latin America, Europe and Asia. LandAmerica Financial Group and its affiliate LandAmerica 1031 Exchange Services, Inc. filed for Chapter 11 protection Nov. 26, 2008 (Bankr. E. D. Virginia, Lead Case No. 08-35994). Dion W. Hayes, Esq., and John H. Maddock III, Esq., at McGuireWoods LLP, are the Debtors' bankruptcy counsel. In its bankruptcy petition, LFG listed total assets of $3,325,100,000, and total debts of $2,839,800,000 as of Sept. 30, 2008. (LandAmerica Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). LANDAMERICA FINANCIAL: Trustee Appoints Creditors Committees ------------------------------------------------------------ Pursuant to Section 1102 of the Bankruptcy Code, W. Clarkson Mcdow, Jr., United States Trustee for Region 3, appointed four creditors to serve as members of the Official Committee of Unsecured Creditors of LandAmerica Financial Group, Inc.: (1) The Bank of New York Mellon, Indenture Trustee Attn: Donna Parisi 101 Barclay Street New York, NY 10286 Tel No.: 614-775-5279 Fax No.: 614-775-5636 E-mail: donna.parisi@bnymellon.com (2) The Prudential Insurance Company of America and related managed entities Attn: Thomas E. Luther Two Prudential Plaza, Suite 5600 180 N. Stetson Street Chicago, IL 60601 Tel No.: 312-861-4432 Email: thomas.luther@prudential.com (3) Vangent, Inc. Attn: Cynthia Hotsky 185 South Broad St. Pawcatuck, CT 06379 Tel No.: 860-599-9729 x 205 Fax No.: 860-599-9716 E-mail: cindy.hotsky@vanguard.com (4) Citadel Equity Fund, Ltd. c/o Citadel Investment Grould, LLC Attn: Mark Steen 131 South Dearborn St. Chicago, IL 60603 Tel No.: 312-395-2100 Fax No.: 312-267-7300 Email: citadelagreementnotice@citadelgroup.com The U.S. Trustee also appointed five creditors to serve as members of the Official Committee of Unsecured Creditors of LandAmerica 1031 Exchange Services, Inc.: (1) Millmar Holdings, LLC Attn: John C. Miller 909 Hockett Road Manakin-Sabot, VA 23103 Phone: 804-784-4799 Fax: 804-784-4371 E-mail: jmiller-1@comcast.net Jmiller@millmarhomes.com (2) Endless Ocean, LLC Attn: Richard F. Giacomo 2 Bonnie Briar Lane Larchmont, NY 10538 Phone: 914-633-3303 E-mail: rg@lrccapital.com (3) MB Venture, Ltd. Attn: Jay Miller and Howard Miller P.O. Box 46468 St. Petersburg, FL 33741 Phone: 727-820-3958 Fax: 727-820-3959 E-mail: hmiller@trenam.com (4) Amarillo Tower Limited Attn: David L. Long 5475 G Street Chino, CA 91710 Phone: 909-628-5531 Fax: 909-628-0970 E-mail: david@dllong.com (5) Petaluma Southpoint, LLC Attn: Kenneth C. Martin P.O. Box 11218 Santa Rosa, CA 95406 Phone: 707-494-3849 707-578-1125 ext. 29 Fax: 707-578-4124 E-mail: kmartin185@aol.com About LandAmerica Financial LandAmerica Financial Group, Inc. is a leading provider of real estate transaction services with offices nationwide and a vast network of active agents. LandAmerica serves its agent, residential, commercial and lender customers throughout the United States, Mexico, Canada, the Caribbean, Latin America, Europe and Asia. LandAmerica Financial Group and its affiliate LandAmerica 1031 Exchange Services, Inc. filed for Chapter 11 protection Nov. 26, 2008 (Bankr. E. D. Virginia, Lead Case No. 08-35994). Dion W. Hayes, Esq., and John H. Maddock III, Esq., at McGuireWoods LLP, are the Debtors' bankruptcy counsel. In its bankruptcy petition, LFG listed total assets of $3,325,100,000, and total debts of $2,839,800,000 as of Sept. 30, 2008. (LandAmerica Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). LAS VEGAS SANDS: Gaming Industry to Remain Under Pressure in 2009 ----------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) LB-UBS COMMERCIAL: Moody's Confirms Low-B Ratings on Six Classes ---------------------------------------------------------------- Moody's Investors Service confirms ten rake classes of LB-UBS Commercial Mortgage Securities Trust, Commercial Mortgage Pass- Through Certificates, Series 2006-C4: -- Class HAF-1, $2,544,000, confirmed at A3; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-2, $4,887,000, confirmed at Baa1; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-3, $5,865,000, confirmed at Baa2; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-4, $5,866,000, confirmed at Baa3; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-5, $9,775,000, confirmed at Ba1; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-6, $9,776,000, confirmed at Ba2; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-7, $7,821,000, confirmed at Ba3; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-8, $7,818,000, confirmed at B1; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-9, $9,777,000, confirmed at B2; previously placed on review on 9/16/08 for possible downgrade -- Class HAF-10, $7,821,000, confirmed at B3; previously placed on review on 9/16/08 for possible downgrade On September 16, 2008, Moody's placed the certificates on review for possible downgrade due to the uncertainty associated with Lehman Brothers Holdings Inc. (LBHI) tenancy of 70 Hudson Street. LBHI occupied 100% of the space at 70 Hudson Street. Moody's has confirmed the ratings of these certificates because LBHI's lease was assumed by and assigned to Barclays Capital Inc. a subsidiary of Barclays Plc (long term issuer rating - Aa2, on review for possible downgrade) on September 22, 2008. Subsequently, on November 21, 2008, Barclays Capital Inc. assigned the lease to Long Island Holding A, LLC, an affiliate. Non-pooled Classes HAF-1, HAF-2, HAF-3, HAF-4, HAF-5, HAF-6, HAF-7, HAF-8, HAF-9, and HAF-10 are collateralized by the junior portions of the 70 Hudson Street Loan, the ALMI of North Dallas Loan, and the Fountains of Miramar Loan. The senior pooled trust balance for the 70 Hudson Street Loan is $75.0 million while the trust junior component is $49.0 million. The 70 Hudson Street Loan is secured by a 409,272 square foot office property located in Jersey City, New Jersey. Moody's monitors transactions on both a monthly basis through two sets of quantitative tools: MOST(R) (Moody's Surveillance Trends) and CMM on Trepp, and a periodic basis through a full review. Moody's prior full review is summarized in a press release dated January 31, 2008. LEE ENTERPRISES: To Violate Covenants on $306MM of Senior Notes --------------------------------------------------------------- Lee Enterprises, Inc., says an upcoming impairment charge of at least $180 million will result in a violation of a covenant for the $306 million of senior notes. Should Lee be unable to negotiate a waiver, the result would be a cross-default with the bank loan, the company said, according to Bill Rochelle of Bloomberg News. Lee said it's in discussions with debt holders regarding waivers. As reported in last Wednesday's Troubled Company Reporter, Lee Enterprises notified the Securities and Exchange Commission that it could not file of its annual report on Form 10-K until Dec. 29, 2008. It says the delay is necessary because it needs additional time to complete the complex calculations required to determine the extent of additional non-cash charges to reduce the carrying value of goodwill and other intangible assets, a result of increasing financial market volatility and deteriorating economic conditions. The company said it expects the impairment charges to total at least $180 million after tax for the fourth quarter of the fiscal year ended Sept. 28, 2008. A portion of a charge of that magnitude would also reduce the stockholders' equity of Pulitzer Inc., a wholly owned subsidiary of the company, and trigger the need for the noteholders to waive the minimum net worth covenant in the guaranty agreement related to the $306 million Senior Notes, a debt facility originated in 2000 by St. Louis Post Dispatch LLC, a Pulitzer Inc. subsidiary. Without a waiver by the noteholders, the reduction in Pulitzer Inc.'s stockholders' equity would constitute an event of default in the guaranty agreement. Unless waived, the condition also would cause a cross-default in Lee's recently amended bank credit agreement, dating to Lee's acquisition of Pulitzer Inc. in 2005. Notice of an event of default would allow creditors to exercise certain remedies granted by the various debt agreements. Timing of the delivery of various financial statements required by the Pulitzer Notes, guaranty agreement and credit agreement could also be delayed by the matters noted above, requiring additional waivers from the noteholders and Lee's bank lenders. The Pulitzer Notes mature in April 2009. On Dec. 12, 2008, KPMG LLP, the company's independent registered public accounting firm, formally notified the company's audit committee chairman that, in the absence of further information in support of the company's ability to meet its obligations as they become due and comply with certain debt covenants, its auditors' report on the consolidated financial statements for the year ended Sept. 28, 2008, to be included in the Annual Report on Form 10-K will include an explanatory paragraph relating to Lee's ability to continue as a going concern. Such a modification of the auditors' report would, unless waived by the lenders, constitute an event of default under Lee's bank credit agreement. KPMG LLP said it will, for the same reasons, also modify its auditors' reports on the separate financial statements of Pulitzer Inc. and St. Louis Post-Dispatch LLC, requiring the need for additional waivers under the compay's various debt agreements. Mary Junck, chairman and chief executive officer, said: "As the economy has continued to worsen, Lee is actively engaged in discussions with the noteholders to extend or renew the Pulitzer Notes as soon as possible, and we are simultaneously working to obtain the necessary waivers under our various debt agreements. Although the credit markets remain very difficult, lenders have shown a willingness to work toward acceptable solutions to help us avoid violating performance conditions in our debt agreements." "Even in this recession, Lee continues to generate substantial cash flow, and we continue to believe that Lee will emerge strong when all the national economic turbulence ends," Mr. Junck said. About Lee Enterprises Lee Enterprises, Inc. publishes daily newspapers, weekly newspapers, and specialty publications in the United States. The company has a strategic alliance with Yahoo!, Inc. Lee Enterprises was founded in 1890. It is based in Davenport, Iowa. LEHMAN BROTHERS: Sets Derivative Deals Protocol; Creditors Object ----------------------------------------------------------------- The official committee of unsecured creditors formed in Lehman Brothers Holdings Inc.'s Chapter 11 cases object to LBHI's proposed procedures for closing out or selling off thousands of derivatives contracts. According to Bloomberg's Bill Rochelle, the Creditors Committee, noting that over 125 contract parties object to the proposed procedures, argued that LBHI should not have carte blanche in closing out or selling the positions. The Committee contends it should have oversight, along with the ability to object to particular transactions. The Debtors are parties to thousands of derivative contracts in which the contractual obligations and values are keyed to one or more underlying assets or indices of asset values and subject to movements in the financial markets. In most cases, the derivative contracts are "securities contracts," "forward contracts," "repurchase agreements," or "swap agreements" and in some cases were governed by a "master netting agreement," each as defined under the Bankruptcy Code. The Debtors entered into the derivative contracts with various counterparties, some in the United States and some in foreign countries, for a variety of reasons that include: (i) hedging against the risks of their business; (ii) speculating in the changes of market rates or prices; and/or (iii) financing. As of Nov. 13, the Debtors are party to approximately 930,000 derivative contract transactions of which approximately 733,000 are purported to have been terminated. Proposed Procedures LBHI has filed a motion before the U.S. Bankruptcy Court for the Southern District of New York to implement a protocol for the assumption and assignment of its derivative contracts. Robert Lemons, Esq., at Weil Gotshal & Manges, in New York, said in a court filing that the proposed protocol would help reduce the costs incurred from the assumption and assignment of the derivative contracts or from the settlement of claims resulting from the termination of the contracts. "Considering the sheer number of derivative contracts, obtaining court approval for each proposed assumption and assignment or settlement would result in burdensome administrative expenses for the estate," Mr. Lemons said. LBHI proposes this protocol with respect to derivative contracts it will assume and assign: (1) LBHI has five days before the assumption and assignment of the derivative contract to notify the person or company that is party to the contract. (2) The notice must contain: * the names and addresses of the parties to the contracts; * identification of the derivative contracts; * a statement that any assignee or its credit support provider has a Standard & Poor's or Fitch credit rating equal to or higher than A- or a Moody's credit rating equal to or higher than A3; any equivalent thereof; or the identity of any proposed assignee and its credit support provider if neither of them is qualified; and * any amounts proposed by LBHI to be paid to cure existing defaults. (3) Any party is deemed to have received adequate assurance of future performance if either an assignee or its credit support provider is qualified, or LBH no longer have any payment or delivery obligations under the contract after payment of the cure amount. (4) With respect to derivative contracts that may require the return of posted collateral as part of a cure amount, LBHI should either return the collateral or, if the collateral is no longer in its possession, it should pay the amount equal to the value of the collateral a day before it serves the notice based upon independent third- party pricing services. LBHI's proposed manner of returning the collateral, including any amount proposed to be paid for collateral that is no longer in its possession, must be included in the notice as a cure amount. (5) Any party should serve its written objection, if any, within five days after the notice is served on Weil Gotshal & Manges, and Curtis Mallet-Prevost Colt & Mosle. The party must specify the reasons for its objection. (6) If any party does not timely serve an objection, that party is deemed: * to have consented to the proposed cure amount, if any, and to the assumption and assignment of the contract; * to have agreed that the assignee has provided adequate assurance of future performance; * to have agreed that all defaults under the contract have been cured as a result or precondition of the assignment, such that the assignee or Lehman Brothers Holdings has no liability or obligation with respect to any default occurring or continuing prior to the assignment; * to have waived any right to terminate the contract or designate an early termination date under the contract as a result of any default that occurred and is continuing prior to the date of the assignment; and * to have agreed that the terms of the court order approving the proposed protocol apply to the assignment. (7) If LBHI is unable to resolve any objection, it may seek authorization of the Court to consummate the proposed assignment. If the dispute is only about the cure amount, the company must pay to the party any undisputed portion of the proposed cure amount and place the disputed portion into a segregated interest-bearing account. The party is entitled to payment from the segregated account of the disputed portion and interest earned upon the resolution by the Court of the dispute, or agreement between the company and the party. (8) Unless LBHI solicits bids from at least four potential assignees and selects the highest or best bid received, the company should obtain the consent of the Official Committee of Unsecured Creditors to assume and assign a derivative contract pursuant to the proposed protocol. (9) If no objection is timely served and the party as well as the Creditors Committee consents to the assignment, LBHI can assume and assign any derivative contract. Upon the assumption and assignment, the assignee and any replacement credit support provider should assume the contract with all the defaults having been deemed cured or waived. (10) After the assignment, LBHI should provide notice to the party of the effective date of the assignment. Any purported termination notice sent by a party based on a default occurring prior to the assignment will be ineffective unless a termination notice is received by LBHI pursuant to the terms of the contract prior to the assignment. (11) In case the derivative contract has been memorialized pursuant to a master agreement, LBHI may assume and assign pursuant to the proposed protocol, only all, but not fewer than all, of the derivative contract transactions entered into pursuant to the master agreement. (12) As part of and to facilitate any assignment of the contract, LBHI may agree to make payments for the benefit of the assignee. Meanwhile, LBHI proposed a protocol for the termination of the derivative contract and the settlement of the claims resulting from the termination: (a) With respect to any derivative contract, LBHI may enter into and execute a termination agreement. (b) A termination agreement may resolve and fix amounts owing between LBHI and the party. (c) In connection with any termination agreement, LBHI is authorized but not required to provide a release to the party. (4) A termination agreement may address and permit the collateral or margin held by LBHI or by the party to be liquidated or returned in accordance with the derivative contract, an applicable master netting agreement or the termination agreement. Parties Object In a statement filed with the Court, Wells Fargo Bank said that it will not object to the proposed procedures and the ratings criteria so long as they do not differ significantly from the procedures and ratings criteria specified in their derivative contracts with LBHI unit Lehman Brothers Special Financing, Inc. The derivative contracts allow the various trusts, with Wells Fargo Bank as trustee, to protect themselves against changes in interest rates and to obtain access to a steady stream of revenue in exchange for assuming credit risks. The contracts are considered key component to maintain the trusts' credit ratings from Standard & Poor' Rating Services, Moody's Investor Services and Fitch Inc. Wells Fargo said that it would also block the approval of the proposed procedures to the extent that it would result in the revision of the collateralization requirements stated in the contracts. The proposed assumption and assignment of derivative contracts also drew criticisms from these parties: * Bayview Financial, L.P. * Bayview Opportunity Master Fund, L.P. * Wellmont Health System * Royal Bank America * Asurion Corporation * Siller Wilk LLP * Canadian National Resources Limited * Caisse De Depot et Placement du Quebec * Total Gas & Power Limited * Federal Home Loan Bank of Pittsburgh * Simpson Meadows * Metavante Corporation * Portfolio Green German CMBS GMBH * E-Capital Profits Limited * Cheung Kong Bond Finance Limited * NATIXIS Environment & Infrastructures * Pacific Life Insurance Company * Asbury Atlantic, Inc. * Asbury-Solomons, Inc. * Metropolitan Transportation Authority * The Federal Home Loan Bank of Dallas * NetApp, Inc. * Iconix Brand Group, Inc. * City and County of Denver, Department of Revenue * Capital Automotive L.P. * Tobacco Settlement Financing Corporation * Wachovia Bank, N.A. * New South Federal Savings Bank, F.S.B. * Delaware River Port Authority * The Hotchkiss School * Linn Energy, LLC * City of Milwaukee, Wisconsin * HFF I, LLC * Barclays Capital, Inc. * South Mississipi Electric Power Association and Coast Electric Power Association * Georgetown University * California Public Employees Retirement System * Southern Community Bank and Trust * Southern Community Financial Corporation * Carolina First Bank * Deer Park Road Corporation * First Choice Power, L.P. * Reynolds American Defined Benefit Master Trust * Reliant Energy Services, Inc. * Reliant Energy Power Supply, LLC * EnergyCo, LLC * EnergyCo Marketing and Trading * Advanced Graphic Printing, Inc. * Thomas Cook AG. * Russell Investment Group, Inc. * JA Solar Holdings Co., LTD * Oklahoma Municipal Power Authority * BRE Bank SA * Southern California Edison Company * Embarcadero Aircraft Securitization Trust * University of Pittsburgh * West Corporation * Danske Bank A/S, London Branch * BRM Group, Ltd. * A.M. McGregor Home * The Toronto-Dominion Bank * Banca Italease S.p.A. * Fulton Bank * EPCO Holdings * SunAmerica Life Insurance Company * Lexington Insurance Company * AIG CDS, Inc. * Carlton Communications Limited * HarbourView CDO III, Limited * Norton Gold Fields Limited * Gaston Christian School, Inc. * National CineMedia * Bryant University * Bank of America, National Association * New Jersey Housing and Mortgage Finance Agency * The Walt Disney Company * Deutsche Bank Trust Company Americas * Deutsche Bank National Trust Company * QVT Financial LP * Standard Chartered Bank * Bank of New York Mellon * The Juilliard School * Tullett Prebon Holdings Corporation * Aircraft Finance Trust * Aliant Bank * FirstBank of Puerto Rico * National Australia Bank Limited * Bremer Financial Corporation * Bank of Montreal * National Agricultural Cooperative Federation * U.S. Bank National Association * Hank's Living Trust * Lahde Capital Management Inc. * Osterreichische Volksbanken-Aktiengesellschaft and Etihad Airways * Societe Generale * Canadian Imperial Bank Commerce * Calyon * Dexia Bank Internationale a Luxembourg SA * Dexia Credit Local * Dexia Kommunalbank Deutschland AG * Dexia Banque Belgique SA * Banif - Banco de Investimento, S.A. * Pursuit Opportunity Fund I Master Ltd. * Instituto de Credito Oficial * Northcrest, Inc. * Citigroup, Inc. * Exum Ridge CB0 2006-I * Exum Ridge CBO 2006-2 * Exum Ridge CBO 2006-4 * Energy America LLC * Direct Energy Business LLC * OHP Opportunity Limited Partnership * Occidental Energy Marketing, Inc. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com-- is the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Through its team of more than 25,000 employees, Lehman Brothers offers a full array of financial services in equity and fixed income sales, trading and research, investment banking, asset management, private investment management and private equity. Its worldwide headquarters in New York and regional headquarters in London and Tokyo are complemented by a network of offices in North America, Europe, the Middle East, Latin America and the Asia Pacific region. The firm, through predecessor entities, was founded in 1850. Lehman filed for chapter 11 bankruptcy Sept. 15, 2008 (Bankr. S.D.N.Y. Case No.: 08-13555). Lehman's bankruptcy petition listed $639 billion in assets and $613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Subsidiary LB 745 LLC, submitted a Chapter 11 petition on Sept. 16 (Case No. 08-13600). Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On Sept. 19, 2008, the Honorable Gerard E. Lynch, Judge of the United States District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act in the case captioned Securities Investor Protection Corporation v. Lehman Brothers Inc., Case No. 08-CIV- 8119 (GEL). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI Barclays Bank Plc has agreed, subject to U.S. Court and relevant regulatory approvals, to acquire Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, on Sept. 22 reached an agreement to purchased Lehman Brothers Holdings, Inc.'s operations in Europe and the Middle East less than 24 hours after it reached a deal to buy Lehman's operations in the Asia Pacific for US$225 million. Nomura paid only $2 dollars for Lehman's investment banking and equities businesses in Europe, but agreed to retain most of Lehman's employees. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. These are currently the only UK incorporated companies in administration. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on Sept. 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on Sept. 16. The two units of Lehman Brothers Holdings, Inc., which has filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, have combined liabilities of JPY4 trillion -- US$38 billion). Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Akio Katsuragi, a former Morgan Stanley executive, runs Lehman's Japan units. Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited and Lehman Brothers Futures Asia Limited have suspended its operations with immediate effect, including ceasing to trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice. The Asian units' asset management company, Lehman Brothers Asset Management Limited, will continue to operate on a business as usual basis. A further notice concerning the retail structured products issued by or arranged by any Lehman Brothers group company will be issued as soon as possible, a press statement said. (Lehman Brothers Bankruptcy News; Bankruptcy Creditors' Service, Inc., <http://bankrupt.com/newsstand/>or 215/945-7000). LILLIAN VERNON: Seeks April 31 Extension to File Liquidating Plan ----------------------------------------------------------------- Lillian Vernon Corp. and its debtor-affiliates ask the United States Bankruptcy Court for the District of Delaware to extend their exclusive period to file a Chapter 11 plan until April 31. The hearing is set for Jan. 12. According to Bill Rochelle of Bloomberg News, the company said it is working with its official committee of unsecured creditors on the terms of a liquidating plan. As reported in the Troubled Company Reporter on April 7, 2008, the Court authorized the Debtors to sell all their assets to Current USA for $15.8 million. Current USA was the successful bidder at an April 1 auction beating Creative Catalog Corp. The auction resulted to a 70% increase in the purchase price for the assets, Bill Rochelle notes. About Lillian Vernon Based in Virginia Beach, Virginia, Lillian Vernon Corp. -- http://www.lillianvernon.com/-- and its affiliates are direct mail specialty catalog and online companies concentrating on the marketing of gifts, holiday products, toys and children's products, personal and home accessories, kitchen and houseware products and garden and outdoor products. They have developed a proprietary customer database containing information about its customers, including such data as order frequency, size and date of last order and type of products purchased. The database contains information with respect to over 27 million customers, gift recipients and people who have requested its catalogs. In the fiscal year ended Feb. 22, 2003, they published 33 catalog editions and mailed approximately 150,000,000 catalogs to past and prospective customers. They also offer products over the Internet. The company and six of its affiliates filed for Chapter 11 protection on Feb. 20, 2008 (Bankr. D. Del., ase No. 08- 10323). Ann C. Cordo, Esq., Daniel B. Butz, and Esq., J. Dehney, Esq. at Morris, Nichols, Arsht & Tunnell, L.L.P. represent the Debtors in their restructuring efforts. Lillian Vernon's parent, Sun Capital Partners Inc., a privately held investment company with offices in Boca Raton, Fla., is not included in the bankruptcy filing. The U.S. Trustee for Region 3 has appointed creditors to serve on an Official Committee of Unsecured Creditors in these cases. The company listed assets of $1 million to $100 million and debts of $1 million to $100 million in its bankruptcy filing. MACH GEN: Moody's Puts B2 Ratings on Review for Possible Upgrade ---------------------------------------------------------------- Moody's Investors Service placed MACH Gen LLC's (MACH Gen or Project) B2 ratings on its 1st lien debt facilities under review for possible upgrade. The rating action reflects the expected repayment of MACH Gen's 1st lien term loan using the net proceeds from the sale of the 1,100 MW Covert power plant. It is Moody's understanding that the sale of the Covert plant to Tenaska was completed recently. Given the expected sizeable debt reduction, Moody's expects significant improvement in MACH Gen's credit metrics potentially leading to a multi-notch increase in MACH Gen's 1st lien debt ratings. That being said, Moody's notes that MACH Gen's ratings will continue to incorporate MACH Gen's 2nd lien term loan which currently totals approximately $1 billion. The review for upgrade will consider revised projections from MACH Gen, the Project's full year 2008 operating performance, MACH Gen's hedging plans for 2010 and onward, and management's strategic plans for MACH Gen. MACH Gen, LLC is the parent holding company of three power projects totaling 2,532 MW consisting of the 360 MW Millennium facility in Massachusetts; the 1,080 MW Athens facility in New York; and the 1,092 MW Harquahala facility in Arizona. MACH Gen is indirectly owned by a group of financial institutions. The last rating action was on January 31, 2007, when MACH Gen's B2 ratings on its 1st lien debt facilities were assigned with a stable outlook. MERRILL LYNCH: Moody's Cuts Rating on Class E $9.6MM Certs. to B2 ----------------------------------------------------------------- Moody's Investors Service downgraded the rating of one class and affirmed seven classes of Merrill Lynch Mortgage Investors, Inc., Mortgage Pass-Through Certificates, Series 1998-C1-CTL: -- Class A-2, $954,880, affirmed at Aaa; previously affirmed at Aaa on 4/18/2007 -- Class A-3, $235,868,000, affirmed at Aaa; previously affirmed at Aaa on 4/18/2007 -- Class A-PO, $1,194,653, affirmed at Aaa; previously affirmed at Aaa on 4/18/2007 -- Class IO, Notional, affirmed at Aaa; previously affirmed at Aaa on 4/18/2007 -- Class B, $38,765,000, affirmed at Aa1; previously upgraded to Aa1 from Aa2 on 4/18/2007 -- Class C, $32,304,000, affirmed at A2; previously upgraded to A2 from Baa1 on 8/9/2005 -- Class D, $38,765,000, affirmed at Ba1; previously upgraded to Ba1 from Ba2 on 8/9/2005 -- Class E, $9,691,000, downgraded to B2 from B1; previously downgraded to B1 from Ba3 on 4/18/2007 Moody's downgraded Class E due to a decline in the credit quality of several of the corporate credits supporting the transaction including Rite Aid Corporation, Circuit City, 24 Hour Fitness, County of Monroe, Price Chopper and Baptist Hospital. Collectively, these tenants comprise 46% of the pool. As of the November 17, 2008 distribution date, the transaction's aggregate certificate balance has decreased by approximately 33% to $421 million from $630 million at securitization. The certificates are supported by 97 loans. Eighty-five of the loans are credit tenant lease loans backed by 12 corporate credits. The loans range in size from less than 1% to 15% of the pool, with the top 10 loans representing 45% of the pool. Twelve loans, representing 27% of the pool, have defeased and are collateralized by U.S. Government securities. Twelve loans have been liquidated from the pool since securitization, resulting in an aggregate loss of $10.8 million. Currently there are no loans in special servicing. Forty-eight loans, representing 23% of the pool, are on the servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. All of the loans backed by properties leased to Rite Aid are on the watchlist due to the company's credit rating. The largest exposure in the pool is Rite Aid Corporation, which represents approximately 23% of the pool (Moody's senior unsecured rating Caa2/Caa3, on review for possible downgrade). Other large exposures include Georgia Power Company (15%; Moody's senior unsecured rating A2, stable outlook), Circuit City Stores (11%), Kroger Co. (7%; Moody's senior unsecured rating Baa2, stable outlook), 24 Hour Fitness (7%). No other single exposure comprises more than 2.5% of the pool. In November 2008, Circuit City announced plans to close 155 stores and subsequently filed for Chapter 11 bankruptcy protection. One of the properties in the pool, located in Crystal Lake, Illinois, is included on Circuit City's list of stores to be closed. Moody's periodically completes full reviews in addition to monitoring transactions on a monthly basis. Moody's prior full review is summarized in a press release dated April 18, 2007. MGM MIRAGE: Fitch Keeps Outlook on Low-B Ratings Negative --------------------------------------------------------- MGM MIRAGE's (MGM) Rating Outlook remains Negative following the announcement that it entered into an agreement to sell Treasure Island (TI) to Phil Ruffin for $775 million. Fitch believes the gaming operating environment and forward outlook continue to weaken, which offsets MGM's enhanced near-term liquidity profile. The Treasure Island asset sale is expected to provide $500 million in cash at closing, which is anticipated in the second quarter of 2009 (Q2'09). The remaining $275 million will be in the form of 10% secured notes that will be paid in two installments over a two-year period after the transaction closes. T his announcement follows the $750 million New York-New York secured note issuance on Nov. 14 that provided a net cash increase of $537 million after consideration of a discount and the repayment of $150 million of Mandalay notes that were puttable on Nov. 15. MGM's enhanced liquidity mitigates Fitch's concerns regarding near-term CityCenter funding requirements and the $1.3 billion of 2009 debt maturities, provided the company focuses on credit improvement when deploying the capital. However, the Negative Outlook continues to incorporate concerns regarding: -- The full funding and development risk of CityCenter, including the level of residential sales proceeds that will be realized; -- The credit market environment, given an additional $1.1 billion of bond maturities in 2010 and $532 million of bond maturities in 2011 in addition to the October 2011 expiration of its $7 billion credit facility; -- The broader consumer economy and Las Vegas operating environment, including the potential impact of significant additional supply on the Las Vegas Strip over the next 12-18 months amid weak demand. Although MGM has enhanced its liquidity in the past month, gaming operating trends, in addition to trends in other travel-related industries, materially deteriorated in Q4'08 and Fitch became more pessimistic on its 2009 outlook. Last week, Nevada reported that Las Vegas Strip revenues declined 26% in October, which was the worst monthly performance during this recession. In addition, Fitch believes the 2009 outlook for the Las Vegas destination market is likely to remain very weak in 2009, with a recovery not expected until 2010 (see 'Fitch: U.S. Gaming Industry Recovery Unlikely Until 2010', dated Dec. 16, 2008). MGM's ratings are: -- Issuer Default Rating 'BB-'; -- Senior secured notes 'BB'; -- Senior unsecured credit facility 'BB-'; -- Senior unsecured notes 'BB-'; -- Senior subordinated notes 'B'. MGM MIRAGE: Fitch Says Industry to Remain Under Pressure in 2009 ---------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) MIDWAY GAMES: Will Lay Off 25% of Work Force & Close Texas Studio ----------------------------------------------------------------- Midway Games Inc., in response to its current financial position, decided on Dec. 12, 2008, to implement an expense reduction program, which included: (i) a reduction in force at its Chicago, San Diego, and Austin, locations; (ii) the closure of its Austin studio; and (iii) the suspension of several of its non-core prototype games. As a result of the reduction in force, the headcount at Midway will be cut by approximately 180 full-time employees, which represents approximately 25% of its total workforce. The reduction in force affects substantially all of the company's functional groups. As a result of the reduction in force, the company expects to incur a cash charge of approximately $1.6 million in the fourth quarter of 2008. This charge is primarily due to expenses related to severance for terminated employees. In addition to the charge related to the reduction in force implemented by Midway Games, the company will incur charges of: (i) approximately $19.9 million related to additional non- cash expenses as a result of the Fundamental Change that triggered an accelerated repurchase schedule with respect to the company's 6.0% Notes and 7.125% Notes, which was previously disclosed in the company's Current Report on Form 8-K filed on December 4, 2008; and (ii) approximately $0.2 million of accelerated expenses related to unamortized debt issue costs with respect to the company's outstanding debts under its Credit Agreements with National Amusements, Inc., $70 million in which Acquisition Holdings Subsidiary I LLC is participating as a result of the Transaction disclosed in (a) the company's Current Report on Form 8-K filed on December 4, 2008, (b) a Schedule 13D/A filed on December 1, 2008, by Sumner M. Redstone, SUMCO, Inc., and National Amusements, Inc., and (c) a Schedule 13D filed on December 5, 2008, by Acquisition Holdings Subsidiary I LLC, MT Acquisition Holdings LLC, and Mark Thomas. The total of the charges in the fourth quarter will be approximately $21.7 million. Lauren Pollock at The Wall Street Journal reports that Midway Games hired investment bank Lazard Ltd. earlier this month to advise on the company's options as it struggles with serious debt issues. Controlling shareholder Sumner Redstone, says WSJ, had sold his 87% stake in Midway Games to private investor Mark Thomas, activating a change-of-control provision on its convertible notes. According to the report, Mr. Redstone sold his stake in Midway Games to try to resolve his debt issues at his holding company, National Amusements Inc. The report states that Mr. Redstone lost hundreds of millions of dollars on his Midway Games investment. "The cost-reduction measures are vital for us to rationalize our operations and provide the resources necessary for our core properties to succeed," said Matt Booty, president and CEO of Midway Games. "These initiatives, along with the other steps we have taken this year, are a response to the specific challenges we are facing at Midway, many of which have been amplified by the current economic conditions." About Midway Games Based in Chicago, Illinois, Midway Games, Inc. (NYSE: MWY), formerly Midway Manufacturing -- http://www.midway.com/-- is a video game publisher. The company sells video games for play on home consoles, handheld devices and personal computers to mass merchandisers, video rental retailers, software specialty retailers, Internet-based retailers and entertainment software distributors. It sells video games primarily in North America, Europe, Asia, and Australia for the major video game platforms and handheld devices. As reported by the Troubled Company Reporter on Nov. 13, 2008, Midway Games said that it continues to face significant challenges with respect to liquidity. In a regulatory filing with the Securities and Exchange Commission, Midway reported $75.9 million in net loss for the three months ended September 30, 2008. Midway Games also disclosed $167.5 million in total assets, including $10.3 million in cash and cash equivalents, as of September 30, 2008. The company had $271.0 million in total liabilities, including $189.2 million in current liabilities. Midway Games said it has experienced annual operating losses since its fiscal year ended June 30, 2000. MOMENTIVE PERFORMANCE: S&P Cuts Corp. Credit Rating to 'B-' ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Momentive Performance Materials Inc. and its subsidiaries by one notch, including its corporate credit rating on Momentive to 'B-' from 'B'. The outlook is stable. The recovery ratings remain unchanged. "The downgrade reflects concerns that Momentive's heavy debt burden will make it difficult to generate positive free operating cash flow in the current weak economic environment," said Standard & Poor's credit analyst Cynthia Werneth. The company began experiencing lower demand for its products in the third quarter of 2008, and this has continued in the fourth quarter. "We believe that operating conditions have deteriorated during the last several weeks as demand for all types of industrial products has slowed considerably both in and outside the U.S.," added Ms. Werneth. Momentive has temporarily idled key facilities in response to lower orders, and is taking a number of actions to reduce labor and other operating costs. "Importantly, we believe the company has sufficient liquidity to weather several quarters of anemic sales, earnings, and cash flow. However, if conditions are worse than we expect, or if weak market conditions persist for longer than a few quarters, liquidity could shrink to uncomfortable levels, and we could take further negative rating actions. Even assuming business conditions turn around before that happens, Momentive is likely to still be very highly leveraged in 2012, when it will have to refinance its maturing revolving credit facility." The rating on silicones and quartz producer Momentive Performance Materials Inc. reflects its satisfactory business risk profile as a leading global silicones producer, tempered by its very high debt leverage since Apollo Management's December 2006 acquisition of 90% of the company from General Electric Co. (GE) for $3.9 billion. Albany, N.Y.- based Momentive is the world's second-largest silicone producer, and silicones represent about 90% of its revenues. The remainder comes from the sale of quartz, primarily for semiconductors. According to S&P: "The outlook is stable. We believe that the company should be able to weather several quarters of poor economic conditions and soft sales. However, we could lower the ratings if economic weakness, raw material inflation, or other factors cause the company to consume more cash than we expect, or if free operating cash flow remains negative for an extended period of time, eroding liquidity. We would lower the ratings into the 'CCC' category if we believe that available liquidity would last for a year or less. We could also lower the ratings if the company makes a below-par exchange offer for any of its debt and we view the exchange as distressed. Assuming the company survives the current economic turmoil, we could lower the ratings in the longer term if we are approaching the December 2012 revolving credit maturity date and are concerned about the company's ability to refinance its heavy debt load. In order to consider a positive outlook and ultimately a somewhat higher rating, we would have to see a sustainable trend of positive free cash generation and debt reduction such that funds from operations to debt approaches 10%." MOMENTUM PROPERTIES: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------------ Debtor: Momentum Properties, LLC 911 Central Avenue Box 112 Albany, NY 12206 Bankruptcy Case No.: 08-14188 Chapter 11 Petition Date: December 16, 2008 Court: Northern District of New York (Albany) Debtor's Counsel: Justin A. Heller, Esq. jheller@nolanandheller.com Nolan & Heller, LLP 39 North Pearl St. Albany, NY 12207 Tel: (518) 449-3300 Total Assets: $14,856,000 Total Debts: $16,258,125 The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ GMAC Mortgage property; $1,191,002 P.O. Box 4622 secured: $1,675,000 Waterloo, IA 50704-4622 Carrington Mortgage property; $849,799 Services, LLC secured: $500,000 P.O. Box 54285 Irvine, CA 92619-4285 Citimortgage, Inc. property; $627,165 P.O. Box 9438 secured: $150,000 Gaithersburg, MD 20898-9438 Specialized Loan Servicing property; $586,759 LLC secured: 475,000 Washington Mutual Bank property; $539,137 secured: $325,000 Countrywide Home Loans property; $415,424 secured: $160,000 Chase Home Finance property; $379,042 P.O. Box 24573 secured: $200,000 Columbus, OH 43224 American Home Mortgage property; $367,500 Servicing, Inc. secured: $250,000 Wachovia Mortgage FSB property; $254,901 secured: 175,000 Option One Mortgage property; $254,811 secured: $199,000 Aurora Loan Services property; $216,000 secured: $130,000 CIT Group/Consumer property; $141,537 Finance, Inc. secured: $90,000 Citibank, N.A. Property; $86,180 secured: $849,799 Montgomery County property $53,633 Treasurer The petition was signed by president and chief executive officer Geoffrey S. Goldman. MORGAN STANLEY: Moody's Junks Ratings on 3 Classes of Certificates ------------------------------------------------------------------ Moody's Investors Service downgraded the ratings of eight classes and affirmed 20 classes of Morgan Stanley Capital I Trust 2007- IQ14, Commercial Mortgage Pass-Through Certificates, Series 2007- IQ14: -- Class A-1, $100,350,168, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-2, $682,300,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-2FL, $500,000,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-3, $53,800,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-AB, $140,800,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-4, $1,062,242,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-5FL, $150,000,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-1A, $722,578,591, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-M, $420,487,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-MFL, $70,000,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class X, Notional, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class A-J, $200,000,000, affirmed at Aaa, previously assigned Aaa on 6/26/2007 -- Class A-JFL, $192,389,000, affirmed at Aaa; previously assigned Aaa on 6/26/2007 -- Class B, $18,394,000, affirmed at Aa1; previously assigned Aa1 on 6/26/2007 -- Class C, $79,704,000, affirmed at Aa2; previously assigned Aa2 on 6/26/2007 -- Class D, $55,179,000, affirmed at Aa3; previously assigned Aa3 on 6/26/2007 -- Class E, $12,263,000, affirmed at A1; previously assigned A1 on 6/26/2007 -- Class F, $42,917,000, affirmed at A2; previously assigned A2 on 6/26/2007 -- Class G, $42,918,000, affirmed at A3; previously assigned A3 on 6/26/2007 -- Class H, $73,573,000, affirmed at Baa1; previously assigned Baa1 on 6/26/2007 -- Class J, $49,049,000, downgraded to Baa3 from Baa2; previously assigned Baa2 on 6/26/2007 -- Class K, $55,179,000, downgraded to Ba2 from Baa3; previously assigned Baa3 on 6/26/2007 -- Class L, $18,394,000, downgraded to Ba3 from Ba1; previously assigned Ba1 on 6/26/2007 -- Class M, $12,262,000, downgraded to B2 from Ba2; previously assigned Ba2 on 6/26/2007 -- Class N, $24,524,000, downgraded to B3 from Ba3; previously assigned Ba3 on 6/26/2007 -- Class O, $12,262,000, downgraded to Caa1 from B1; previously assigned B1 on 6/26/2007 -- Class P, $12,262,000, downgraded to Caa2 from B2; previously assigned B2 on 6/26/2007 -- Class Q, $18,394,000, downgraded to Caa3 from B3; previously assigned B3 on 6/26/2007 Moody's downgraded Classes J, K, L, M, N, O, P and Q due to the overall decline in pool performance, increased dispersion of loan credit quality and anticipated losses from loans in special servicing. Moody's weighted average loan to value (LTV) ratio is 127% compared to 121% at securitization. In addition to an overall increase in LTV, LTV dispersion has increased since securitization. Based on Moody's analysis, approximately 60% of the pool has an LTV in excess of 120% compared to 45% at securitization. As of the November 17, 2008 distribution date, the transaction's aggregate certificate balance has decreased by less than 1% to $4.88 billion from $4.90 billion at securitization. The Certificates are collateralized by 424 mortgage loans ranging in size from less than 1% to 16% of the pool, with the top 10 loans representing 41% of the pool. The pool has not experienced any losses since securitization. There are five loans currently in special servicing, including the pool's fourth and eighth largest loans. The specially serviced loans represent 6% of the pool. The largest specially serviced loan is the New York City Apartment Portfolio ($195.0 million -- 4.0%), which is secured by 37 multifamily properties (1,299 units) located in East Harlem, New York. The loan was transferred to special servicing in September 2008 due to the Voluntary Administrative Receivership filing of the loan's U.K.-based guarantors, Insureprofit Limited and Starlight Investments Limited. This action constituted a non-monetary default of the loan. The properties are undergoing a renovation and conversion of rent regulated units to market rents. The conversion is proceeding slower than expected. At securitization, a $5.0 million interest reserve was established to cover debt service shortfalls. Currently, approximately $1.3 million of this reserve remains. The special servicer estimates that the reserve may be depleted by the end of the third quarter of 2009. In addition to the first mortgage loan, there is a $20.0 million mezzanine loan secured by a pledge of equity interests in the borrower. Although Moody's does not anticipate a loss on this loan in the near term, Moody's current analysis reflects a slower rate of conversion of units to market rents, higher operating expenses and a lower market rental growth rate. The second largest loan in special servicing is the City View Center Loan ($81.0 million -- 1.7%), which is secured by a 506,000 square foot retail center located in Garfield Heights, Ohio. The loan was transferred to special servicing on November 12, 2008, due to a decline in debt service coverage. The largest tenant, Wal-Mart (29% of gross leasable area (GLA); lease expiration 2027), vacated in September 2008 because of concerns about environmental issues. The property had previously been utilized as a quarry and later as a landfill that ceased operations in the 1970's. The landfill was subsequently capped and a gas extraction system was installed. The property is operating under the supervision of the Ohio EPA, which filed a suit in July 2008 against the developer and borrower over alleged failures to comply with EPA provisions. The litigation was settled in early December and a consent order has been entered into which requires the previous owner/developer of the property to install supplementary gas extraction and monitoring systems as well as a leachate collection system. Both the previous owner and the current owner are required to operate and maintain these systems. Wal-Mart has not indicated whether it will re-open the store. Several other tenants, including Jo-Ann Stores and PetSmart, have also vacated the center and the Circuit City store is on the company's list of store closings. Moody's LTV is 182% compared to 118% at securitization. Moody's is currently estimating an aggregate $2.7 million loss for the remaining specially serviced loans. Seventy-one loans, representing 14% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Moody's was provided with partial and full-year year 2007 and partial-year 2008 operating results for 94% and 59% of the pool, respectively. The three largest loan exposures represent 26.3% of the pool. The largest exposure is the Beacon Seattle & DC Portfolio ($775.0 million -- 15.9%), which represents a pari passu interest in a $2.7 billion first mortgage loan. The loan is secured by 20 office properties located in Washington, Virginia and Washington, DC. The buildings range from 103,000 to 1.1 million square feet and total 9.8 million square feet. The portfolio was 92% occupied as of June 2008 compared to 97% at securitization. The loan is interest only for the entire five year term. Moody's LTV is 158% compared to 154% at securitization. The second largest exposure is the Tabor Center and U.S. Bank Tower Loan ($300.0 million -- 6.1%), which is secured by two Class A office properties totaling 1.2 million square feet located in downtown Denver, Colorado. The overall occupancy of the two properties was 95% as of March 2008, essentially the same as at securitization. The largest tenant is U.S. Bank, which occupies 11% of the premises through December 2016. The loan is interest only for its entire five year term. Moody's LTV is 143%, the same as at securitization. The third largest exposure is the PDG Portfolio Loan ($212.0 million -- 4.3%), which is secured by 11 retail properties located in the Phoenix, Arizona MSA. The properties range from 35,000 to 288,000 square feet and total 1.5 million square feet. At securitization, several of the properties were leased at below market occupancy levels. It was anticipated that the occupancy of these properties would increase but this has not yet happened. The loan is interest only for its entire 10-year term. Moody's LTV is 138% compared to 124% at securitization. Moody's monitors transactions on both a monthly basis through two sets of quantitative tools: MOST(R) (Moody's Surveillance Trends) and CMM on Trepp, and a periodic basis through a full review. Moody's prior full review is summarized in a Pre-Sale Report dated May 11, 2007. NEFF CORP: S&P Lowers Corp. Credit Ratings to Selective Default --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit ratings on Miami-based equipment rental company Neff Corp. (Neff), and subsidiary Neff Rental Inc., to 'SD' (selective default) from 'CC'. "We also lowered the issue-level rating on Neff's 10% senior notes due 2015 to 'D' from 'C'," S&P said. "At the same time, we removed the ratings from CreditWatch, where they were placed with negative implications on Nov. 18, 2008. In addition, we withdrew our recovery rating on the senior notes. "The downgrade follows the company's announcement that approximately $196 million aggregate principal amount of the senior notes, representing 85% of the outstanding senior notes, were validly tendered," said Standard & Poor's credit analyst Helena Song. "As we noted when we placed ratings on CreditWatch, we consider the offer a distressed exchange and, as such, tantamount to a default. The rating actions reflect effective completion of the tender offer." "We will continue to rate Neff and could raise the rating back to the 'CCC' category or higher, depending on our assessment of the company's new capital structure and liquidity profile." NES RENTALS: S&P Holds 'B+' Rating & Revises Outlook to Negative ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on NES Rentals Holdings Inc. to negative from stable. "At the same time, we affirmed all ratings on the company, including the 'B+' long- term corporate credit rating," S&P said. "The outlook revision reflects our expectation that, amid weakening conditions in nonresidential construction markets, NES's earnings and credit quality could come under pressure," said Standard & Poor's credit analyst Helena Song. "We expect that credit measures (debt to EBITDA) would remain on the higher end of our expectations for the rating." The ratings on NES Rentals reflect Standard & Poor's Ratings Services' assessment of the company's weak business risk profile as a regional equipment rental provider and its highly leveraged financial profile. As a regional company, NES is one of the six largest operators in the competitive U.S. equipment rental industry. Chicago-based NES operates in about 80 locations, offering general construction and other equipment for rent to construction and petrochemical companies and other industrial end users. The commercial rental equipment industry is highly fragmented and competitive, and demand relies a great deal on nonresidential construction. Competition comes mainly from local equipment rental companies and other regional companies such as H & E Equipment Services Inc., Sunbelt Rentals (a unit of U.K.-based Ashtead Group PLC), and national competitors RSC Equipment Rental and United Rentals Inc. Nonresidential construction spending has started to turn down in 2008 and Standard & Poor's expects it to continue to decline in 2009. Rental rates, which have increased for the past several years, have started to decline, as are utilization rates. "NES reorganized and emerged from Chapter 11 in February 2004, and management has reduced the number of its locations to about 80, mainly as a result of asset sales, improved margins, and reduced headcount and fixed costs. We expect the company to reduce capital spending following a period of increased investments. NES expects to remain customer-focused and to grow organically, compared with its previous strategy of growth through acquisitions." "An affiliate of private equity firm Diamond Castle Holdings LLC acquired NES in July 2006, in a transaction valued at $850 million. Debt is still a major component of the capital structure and leverage is relatively high, at more than 85% debt to capital (adjusted for operating leases). We estimated total debt (adjusted for operating leases) to EBITDA as of Sept. 30, 2008, to be about 4.2x. The company is in compliance with its financial covenants. The current ratings and outlook are based on the assumption that key end markets, specifically nonresidential construction markets, will decline by 15% in 2009. However, we could lower the rating if nonresidential spending drops significantly in 2009, or if NES is unlikely to generate more than $25 million of free operating cash flow in 2009. Upside potential for the rating is limited at this point in the cycle." NEWPORT WAVES: Moody's Downgrades Ratings on 29 Classes of Notes ---------------------------------------------------------------- Moody's Investors Service has downgraded its ratings of twenty- nine classes of notes issued by Newport Waves CDO. The Newport Waves CDO transactions are synthetic CDO tranches referencing the same managed pool of corporate entities. The rating actions are a response to the exposure of corporate names with signigicant credit deterioration in the current economic environment. This will weigh on the ratings of the tranches in this transaction. Class Description: Series 1 $1,000,000 Sub-Class B3A-$L Notes Due 2014 Prior Rating: Baa3 Prior Rating Date: 6/28/2007 Current Rating: Ba2 Class Description: Series 1 $1,000,000 Sub-Class B3A-$F Notes Due 2014 Prior Rating: Baa3 Prior Rating Date: 6/28/2007 Current Rating: Ba2 Class Description: Series 1 $1,000,000 Sub-Class B3-$F Notes Due 2014 Prior Rating: Baa3 Prior Rating Date: 6/28/2007 Current Rating: Ba2 Class Description: Series 1 $1,250,000 Sub-Class A7-$L Notes Due 2014 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 1 $1,250,000 Sub-Class B2-$L Notes Due 2014 Prior Rating: Baa2 Prior Rating Date: 6/28/2007 Current Rating: Ba1 Class Description: Series 1 $1,500,000 Sub-Class A7B-$F Notes Due 2014 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 1 $2,000,000 Sub-Class A7A-$L Notes Due 2014 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 1 $10,000,000 Sub-Class B3-$L Notes Due 2014 Prior Rating: Baa3 Prior Rating Date: 6/28/2007 Current Rating: Ba2 Class Description: Series 2 $850,000 Sub-Class B2A-$F Notes Due 2017 Prior Rating: Baa2 Prior Rating Date: 6/28/2007 Current Rating: Baa3 Class Description: Series 2 $1,000,000 Sub-Class B2-$F Notes Due 2017 Prior Rating: Baa2 Prior Rating Date: 6/28/2007 Current Rating: Baa3 Class Description: Series 2 $1,000,000 Sub-Class B3-$L Notes Due 2017 Prior Rating: Baa3 Prior Rating Date: 6/28/2007 Current Rating: Ba2 Class Description: Series 2 $1,400,000 Sub-Class A7B-$L Notes Due 2017 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 2 $1,500,000 Sub-Class A7-$LS Notes Due 2017 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 2 $2,400,000 Sub-Class A7D-$F Notes Due 2017 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 2 $5,000,000 Sub-Class A7-$L Notes Due 2017 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 2 $5,000,000 Sub-Class A7A-$L Notes Due 2017 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 2 $5,000,000 Sub-Class A7C-$L Notes Due 2017 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 2 $10,000,000 Sub-Class B2-$L Notes Due 2017 Prior Rating: Baa2 Prior Rating Date: 6/28/2007 Current Rating: Baa3 Class Description: Series 2 $25,000,000 Sub-Class B3-$F Notes Due 2017 Prior Rating: Baa3 Prior Rating Date: 6/28/2007 Current Rating: Ba2 Class Description: Series 3 CLP5,401,000,000 Sub-Class A7-CLP Notes Due 2017 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 4 Yen500,000,000 Sub-Class A6-YL Notes Due 2014 Prior Rating: A2 Prior Rating Date: 6/28/2007 Current Rating: Baa1 Class Description: Series 5 $50,000,000 Sub-Class A1-$LMS Notes Due 2014 Prior Rating: Aaa Prior Rating Date: 6/28/2007 Current Rating: Aa1 Class Description: Series 5 $60,000,000 Sub-Class A3-$LMS Notes Due 2014 Prior Rating: Aa2 Prior Rating Date: 6/28/2007 Current Rating: Aa3 Class Description: Series 6 Yen1,000,000,000 Sub-Class A6-YL Notes Due 2017 Prior Rating: A2 Prior Rating Date: 6/28/2007 Current Rating: Baa1 Class Description: Series 7 EUR8,000,000 Sub-Class A6-EL Notes Due 2014 Prior Rating: Baa1 Prior Rating Date: 8/20/2008 Current Rating: Baa2 Class Description: Series 10 $10,000,000 Sun-Class A5-$L Notes Due 2017 Prior Rating: A1 Prior Rating Date: 6/28/2007 Current Rating: A3 Class Description: EUR20,000,000 A7-ES Newport Waves CDO Linked CDS Prior Rating: A3 Prior Rating Date: 6/28/2007 Current Rating: Baa3 Class Description: EUR20,000,000 B2-ES Newport Waves CDO Linked CDS Prior Rating: Baa2 Prior Rating Date: 6/28/2007 Current Rating: Ba1 Class Description: $7,500,000 A7-$S New port Waves CDO Linked CDS Prior Rating: A3 Prior Rating Date: 6/28/2007 Current Rating: Baa2 NORTEL NETWORKS: Moody's Junks Rating on Series 2001-1 Certs. ------------------------------------------------------------- Moody's Investors Service downgraded the rating of Nortel Networks Lease Pass-Through Trust, Pass-Through Trust Certificates, Series 2001-1: -- Cusip 65656MAA9, $120,350,219, downgraded to Caa2 from B3; previously confirmed at B3 on 8/12/2005 Moody's downgraded the transaction's rating to align with the corporate rating of Nortel Networks Limited which was downgraded on December 15, 2008 (backed senior unsecured rating Caa2, negative outlook). The transaction is supported by a mortgage on two office buildings situated in Raleigh, North Carolina which are leased to Nortel Networks Inc., a wholly owned subsidiary of Nortel Networks Limited. Nortel guarantees rent payments and performance of the tenant's obligations under the lease. The lease is for a 15-year term, subject to four five-year renewal options. If the tenant does not extend the lease, the note will be redeemed by a surety bond issued by ZC Specialty Insurance Company (financial strength rating A3, stable outlook). The rating on the note was assigned by evaluating factors determined to be applicable to the credit profile of the note, such as: i) the nature, sufficiency and quality of historical performance information regarding the asset class as well as for the transaction sponsor; ii) an analysis of the collateral being securitized; iii) an analysis of the policies, procedures and alignment of interests of the key parties to the transaction, most notably the originator and the servicer; iv) an analysis of the transaction's governance and legal structure; and vi) a comparison of these attributes against those of other similar transactions. In rating this transaction, Moody's used its credit-tenant lease financing rating methodology. Under Moody's CTL approach, the rating of a transaction's certificates is primarily based on the senior unsecured debt rating (or the corporate family rating) of the tenant, usually an investment grade rated company, leasing the real estate collateral supporting the bonds. This tenant's credit rating is the key factor in determining the probability of default on the underlying lease. The lease generally is "bondable", which means it is an absolutely net lease, yielding fixed rent, paid to the trust through a lock-box, sufficient under all circumstances to pay in full all interest and principal of the loan. The leased property should be owned by a bankruptcy-remote, special purpose borrower, which grants a first lien mortgage and assignment of rents to the securitization trust. The dark value of the collateral, which assumes the property is vacant or "dark", is then examined, which value must be sufficient, assuming a bankruptcy of the tenant and rejection of the lease, to support the expected loss consistent with the certificates' rating. The certificates' rating will change as the senior unsecured debt rating (or the corporate family rating) of the credit tenant may change. Moody's also considers the overall structure and legal integrity of the transaction. OFFICE DEPOT: Moody's Downgrades CFR to Ba3; Outlook Negative ------------------------------------------------------------- Moody's Investors Service downgraded Office Depot, Inc.'s corporate family and probability of default ratings to Ba3, and downgraded the senior unsecured note rating to B1. The outlook is negative. Office Depot's SGL-3 speculative grade liquidity rating was affirmed. This concludes the review for possible downgrade that was initiated on October 29, 2008. The downgrade results from a continuing weak sales environment, which is forcing Office Depot to close underperforming stores, as well as Moody's expectation that fourth quarter 2008 operating performance will be weak, with little improvement occurring until at best late-2009. The company recently announced that it will be closing 112 underperforming retail stores, or approximately 9% of its store base, and 6 of its 33 distribution centers. "Office Depot's decision to cull its store and distribution center base and slow new store openings in the face of a difficult macroeconomic-driven sales environment makes sense for the long- term," stated Moody's Senior Analyst Charlie O'Shea. "The issue for the short-to-medium-term remains how weak the company's operating performance and credit metrics will become. Moody's feels it likely that Office Depot's leverage will remain well above 5 times for the foreseeable future, which is more reflective of a low-Ba/high-B credit profile." Office Depot's Ba3 rating considers its credit metrics, which have weakened dramatically thus far in 2008, with the fourth quarter expected to continue the trend, resulting in a credit profile more representative of a low-Ba/high B rating. Debt/EBITDA for the September 2008 LTM is 5.7 times, with the likelihood that this level will not improve once fourth quarter 2008 is cycled in. The rating also considers ODP's still solid, though weakening, number two position in the office supplies segment, balanced by the difficult macroeconomic operating environment in the U.S. which continues to compress operating performance. The negative outlook considers the increased risk that credit metrics may continue to deteriorate well into 2009. The affirmation of Office Depot's SGL-3 speculative grade liquidity rating considers that despite revenue and profit declines, liquidity remains adequate. A key factor in the affirmation is the company's $1.25 billion asset-based revolving credit facility which has no active financial covenants and should continue to provide solid alternate liquidity. Ratings downgraded include: * Corporate family rating to Ba3 from Ba1; * Probability of default rating to Ba3 from Ba1, and * Senior unsecured notes to B1 (LGD-5, 74%) from Ba2 (LGD-5, 72%) Rating affirmed: * Speculative grade liquidity rating of SGL-3. The last rating action for Office Depot was the October 29, 2008 placing of the ratings on review for possible downgrade. Office Depot, Inc., based in Boca Raton, Florida, is the second largest retailer of office supplies, with LTM September 2008 revenues of $15.1 billion and 1,275 retail locations in North America. OLIN CORP: S&P Assigns Preliminary Low-B Ratings on Debts --------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary 'BB+' senior debt and 'BB-' subordinated debt ratings to the new shelf registration filed Dec. 12, 2008, by Olin Corp. (BB+/Stable/--). The shelf registration covers an indeterminate amount of senior and subordinated debt securities, preferred stock, common stock, and warrants. Proceeds from future drawdowns may be used for general corporate purposes, including additions to working capital, capital expenditures, stock repurchases, repayment of indebtedness, and acquisitions. The Clayton, Mo.-based chemical manufacturing company had total debt of roughly $250 million at Sept. 30, 2008. "Although Olin's shelf registration has been refreshed, we anticipate that the company will prudently manage its use of leverage in order to continue to support its current ratings," said Standard & Poor's credit analyst James T. Siahaan. Continued strength in caustic soda pricing should help temper the weakness in chlorine, with the effects of the most recent pricing initiatives still to be realized. Operating results are currently favorable, and should remain reasonable during the near-to- intermediate term, given the company's currently manageable level of debt,, a reduction in Olin's funds from operations would have to be substantial for credit measures to be pressured. Olin's earnings are considerably exposed to commodity markets that are subject to changes in economic conditions and the balance between supply and demand for its key products, a factor that constrains credit quality prospects. "If there is a meaningful negative divergence from anticipated income because of a worse-than-expected business cycle, or if more debt is added into the capital structure, we could revise the outlook to negative or lower ratings, Mr. Siahaan said. PARK-OHIO INDUSTRIES: S&P Holds B+ Long-Term Rating; Outlook Neg. ----------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Cleveland, Ohio-based Park-Ohio Industries Inc. to negative from stable. "At the same time, we affirmed our ratings on the company, including the 'B+' long-term corporate credit rating," S&P said. "The outlook revision reflects weaker-than-expected operating performance, and credit metrics," said Standard & Poor's credit analyst Sarah Wyeth. Earnings have been affected by weakness in key end markets, particularly auto and heavy-duty truck manufacturing. Declining profitability and lower cash generation could put pressure on the company's debt service coverage covenant. "The ratings on Park-Ohio reflect the company's highly leveraged financial profile and its weak business profile as a diversified operator of logistics and manufacturing businesses, serving cyclical and competitive end markets. Park-Ohio, a wholly owned subsidiary of unrated Park-Ohio Holdings Corp., operates three business segments, which serve a variety of end markets, including transportation, semiconductors, industrial equipment, agricultural equipment, construction equipment, and aerospace. The supply technologies segment (formerly known as integrated logistics service), which generated about 48% of sales in the first nine months of 2008, supplies production components via supply chain management and wholesale distribution services. The manufacturing products segment (around 37% of sales) designs and produces forged and machined products for specific customer applications. The aluminum products segment engineers, casts, and produces various aluminum components for original equipment manufacturers, primarily in the auto industry, and accounts for about 15% of sales. "Park-Ohio's credit quality results from the cyclical, competitive, and seasonal character of its end markets, including the auto and heavy-duty truck manufacturing segments, which account for about 24% and 11% of net sales, respectively. The company recently announced that it does not expect to renew the majority of its business with Navistar, its largest customer, due to weak profitability, reflecting the current weakness in Park- Ohio's end markets. The company's low-margin logistics business has been hurt by low volumes and high raw material costs, but could see attractive, long-term growth opportunities from outsourcing among U.S. manufacturers. Park-Ohio's business profile benefits from a broad product line, a relatively large, somewhat diverse customer base, and good geographic diversity with foreign sales representing almost 30% of revenues. Operating margins (before depreciation and amortization) are in the mid- to high-single-digits and could deteriorate as end markets weaken further in 2009. "Total debt (adjusted for operating leases) to EBITDA was 5.8x on Sept. 30, 2008. Our expectations for the current rating include a ratio of 4x to 5x. Funds from operations (FFO) to total debt is 16%, within our expectation of the midteens percentage area. The ratings do not incorporate debt-financed acquisitions. "We could lower the ratings if debt to EBITDA exceeds 6x or if the covenant headroom declines meaningfully. Covenants could be violated, for example, if EBITDA declines to $65 milion and capital expenditures remains above $20 million." PERKINS & MARIE: S&P Junks Corp. Credit Rating; Outlook Negative ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Memphis, Tenn.-based Perkins & Marie Callender's Inc.'s (Perkins) to 'CCC' from 'B-.' The outlook is negative. "The downgrade reflects our growing concern that Perkins' liquidity may not be adequate to meet the interest payments on its $190 million unsecured 10% senior notes and $132 million 14% senior secured notes when they come due in April and May 2009, respectively," said Standard & Poor's credit analyst Jackie E. Oberoi. In addition, Perkins' poor operating performance has led to weakening credit metrics, with leverage that reached more than 11x as of the 12 months ended Oct. 5, 2008, and interest coverage of less than 1x. PIERRE FOODS: Consummates Ch. 11 Plan, Exits Bankruptcy ------------------------------------------------------- Pierre Foods Inc. said it has consummated its Chapter 11 plan and exited reorganization on Dec. 12. "Pierre Foods is emerging from Chapter 11 with a strengthened balance sheet and is well positioned to capitalize on the significant opportunities we see today and in the future," said William Toler, the new CEO of the company. "The entire team is energized and looking forward to continuing our growth as a stronger company. In only five months, the Company has effectively addressed its financial and operational challenges and laid a strong foundation for its future. The expeditious restructuring of Pierre is a testament to its loyal employees, dedicated customers and vendors and the strong relationship we have with our new owner sponsor, Oaktree Capital Management. I believe everyone at the Company is energized and excited to continue this success as we begin operating outside of Chapter 11." Bloomberg's Bill Rochelle notes that the Plan, which was confirmed Dec. 11, reduces debt by $266 million, gives control to the secured lender Oaktree Capital Management LLC, pays 12 percent cash to unsecured creditors, and converts $242 million in pre- bankruptcy secured debt into all of the new equity and a $85 million secured, subordinated mezzanine loan. The secured debt holders are estimated to recover between 73% and 92%. As reported by the Dec. 11 issue of the Troubled Company Reporter, with the Bankruptcy Court's approval of the Plan, funds managed by Oaktree Capital Management L.P., have become the majority owner of Pierre. Oaktree Capital is Pierre's single largest creditor and provider of the company's debtor-in-possession credit facility. The Plan also provides for these terms: -- a portion of the existing prepetition secured indebtedness will be satisfied in cash; -- conversion of $85 million of existing prepetition secured indebtedness to a new mezzanine facility; -- conversion of the remainder of the existing prepetition secured indebtedness to 100% of the equity of Reorganized Pierre; -- a new exit facility in the amount of $95 million to fund the Company's ongoing operations and pay obligations under the Plan. The Company expects less than $60 million to be drawn at exit; -- the Debtors' Senior Subordinated Notes in the principal amount of $125 million will be cancelled; and -- 12% cash recovery for unsecured creditors including holders of Senior Subordinated Notes. About Pierre Foods Based in Cincinnati, Ohio, Pierre Foods, Inc. -- http://www.pierrefoods.com-- manufactures and sells ready-to-cook and pre-cook products. The company and and 13 of its affiliates filed for Chapter 11 protection on July 15, 2008 (Bankr. D. Del. Lead Case No. 08-11469). Jonathan S. Henes, Esq., and Lisa G. Laukitis, Esq., at Kirkland & Ellis; and Daniel J. DeFranceschi, Esq., and Paul N. Heath, Esq., at Richards, Layton & Finger P.A., represent the Debtors in their restructuring efforts. The Debtors selected Kurtzman Carson Consultants LLC as their claims agent. The United States Trustee for Region 3 appointed creditors to serve on an Official Committee of Unsecured Creditors. The Committee selected Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, in New York, and James R. Savin, Esq., at Akin Gump's Washington, D.C. office, as counsel. Oaktree Capital Management, the Debtors' DIP lender and which is serving as plan sponsor, is represented by Van C. Durrer, II, Esq., at Skadden Arps, Slate Meagher & Flom LLP, in Los Angeles, California. Wachovia Bank, N.A., the administrative agent under the Debtors' June 2004 credit agreement, is represented by Gregory Bray, Wsq., and Haig Mark Maghakian, Esq., at Milbank Tweed Hadley McCloy LLP PIERRE FOODS: W. Toler to Lead Firm as CEO Post-Emergence --------------------------------------------------------- In connection with its emergence, Pierre Foods Inc. said William Toler, has been named chief executive officer Dec. 12, when the company emerged from bankruptcy. Mr. Toler succeeds Norbert Woodhams, who is retiring from the company. Pierre's Chapter 11 Plan was confirmed by the United States Bankruptcy Court for the District of Delaware on Dec. 10, 2008. In conjunction with the Plan, Pierre has also closed its $95 million exit financing facility. Mr. Toler said, "It is an honor to be given the opportunity to lead Pierre's talented team of employees. We will get started right away and utilize the positive momentum from the emergence from Chapter 11 to keep the Company moving in the right direction. While there is still work to be done, I believe Pierre is now a financially stable company and can be a major competitor in the industry. On behalf of everyone at Pierre, I would like to wish Norb the best in his future endeavors." As of Dec. 12, Pierre's new Board of Directors includes: -- Steven Kaplan - Chairman of the Board -- William D. Toler - Director -- Matthew Wilson - Director Additionally, the company expects to announce the appointment of two new members of the Board in the coming weeks. Mr. Toler brings more than 25 years of industry experience to Pierre Foods. He most recently served as President of Pinnacle Foods and was a member of its Board of Directors. Mr. Toler joined Pinnacle Foods in March 2004 as Executive Vice President, Sales. Prior to that, Mr. Toler oversaw Aurora's sales department beginning in April 2003. Previously, he was President of North America for ICG Commerce, a procurement services company. Prior to joining ICG Commerce, Mr. Toler was President of Campbell Sales Company from 1995 to 2000. At Campbell Sales Company, he was responsible for $4 billion in sales, including Campbell Soup Company's flagship soup brands Condensed, Chunky and Select, V-8 beverages, and Prego and Pace sauces. He joined Campbell Sales Company from Nabisco, where he was Vice President, Sales and Integrated Logistics from 1992 to 1995. Prior to Nabisco, he was Vice President/National Sales Manager for Reckitt & Colman from 1989 to 1992. Mr. Toler began his career at Procter & Gamble, where he worked from 1981 to 1989. About Pierre Foods Based in Cincinnati, Ohio, Pierre Foods, Inc. -- http://www.pierrefoods.com-- manufactures and sells ready-to-cook and pre-cook products. The company and and 13 of its affiliates filed for Chapter 11 protection on July 15, 2008 (Bankr. D. Del. Lead Case No. 08-11469). Jonathan S. Henes, Esq., and Lisa G. Laukitis, Esq., at Kirkland & Ellis; and Daniel J. DeFranceschi, Esq., and Paul N. Heath, Esq., at Richards, Layton & Finger P.A., represent the Debtors in their restructuring efforts. The Debtors selected Kurtzman Carson Consultants LLC as their claims agent. The United States Trustee for Region 3 appointed creditors to serve on an Official Committee of Unsecured Creditors. The Committee selected Michael S. Stamer, Esq., at Akin Gump Strauss Hauer & Feld LLP, in New York, and James R. Savin, Esq., at Akin Gump's Washington, D.C. office, as counsel. Oaktree Capital Management, the Debtors' DIP lender and which is serving as plan sponsor, is represented by Van C. Durrer, II, Esq., at Skadden Arps, Slate Meagher & Flom LLP, in Los Angeles, California. Wachovia Bank, N.A., the administrative agent under the Debtors' June 2004 credit agreement, is represented by Gregory Bray, Wsq., and Haig Mark Maghakian, Esq., at Milbank Tweed Hadley McCloy LLP PFAU PFAU: Case Summary & 11 Largest Unsecured Creditors -------------------------------------------------------- Debtor: Pfau, Pfau & Pfau, LLC P.O. Box 838 Fallbrook, CA 92088 Bankruptcy Case No.: 08-12840 Type of Business: The Debtor is a real estate developer. Chapter 11 Petition Date: December 16, 2008 Court: Southern District of California (San Diego) Judge: Peter W. Bowie Debtor's Counsel: Thomas C. Nelson, Esq. 550 West C Street, Suite 1850 San Diego, CA 92101 Tel: (619) 236-1245 Total Assets: $130,767,480 Total Debts: $48,709,138 The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Sheldon Group services $321,618 901 Dove Street, Suite 140 Newport Beach, CA 92660 Tel: (949) 777-9400 Excel Engineering services $290,438 440 State Place Escondido, CA 92029 Tel: (760) 745,8118 Consultants Collaborative services $175,000 160 Industrial Street #200 San Marcos, CA 92078 Tel: (760) 471-2365 BHA services $139,510 Angie Wolf Consulting services $60,000 The Planning Center services $51,768 Summer/Murphy & Partners servcices $28,251 Premium Assignment Corp. services $10,926 Wesley W. Peltzer services $6,048 PBS&J services $5,892 Rick Gittings services $5,850 William Hezmalhalch services $3,340 The petition was signed by managing member Ray Gray. POLYONE CORP: S&P Cuts Corp. Credit Rating to 'B'; Outlook Stable ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on PolyOne Corp., including lowering its corporate credit rating to 'B' from 'B+'. The outlook is stable. According to S&P: "At Sept. 30, 2008, the company had about $730 million in adjusted debt outstanding. We adjusted debt to include capitalized operating leases, an accounts receivable securitization program, and tax-adjusted pension benefits. "The downgrade reflects our expectations for weak earnings in the next several quarters and, consequently, for weaker credit metrics in 2009," said Standard & Poor's credit analyst Paul Kurias. "In particular, the ratio of funds from operations to total debt is expected to be around 10% in 2009, which is below our expectation of 15% for the previous rating." "We could lower the ratings if earnings decline more than we expect because of weaknesses in the operating environment to the extent that EBITDA declines meaningfully below the Sept. 30, 2008, level of about $115 million. This would result in the key credit ratio of funds from operations to total debt to be below our expectations of 10% for the rating. We will also lower ratings if liquidity, including availability and cash, declines from current levels on a sustained basis, or if the EBITDA covenant cushion is consistently below 10%." POTLATCH CORP: Fitch Affirms IDR and Revenue Bonds Rating at 'BB+' ------------------------------------------------------------------ Fitch Ratings has taken various rating actions on Potlatch Corporation's (PCH) Issuer Default Rating (IDR) and debt ratings: -- $250 million new senior secured revolving credit facility rated 'BBB-'; -- IDR affirmed at 'BB+'; -- Revenue bonds affirmed at 'BB+'; -- Medium term notes, credit sensitive debentures due in 2009 and 6.95% notes due in 2015 upgraded to 'BBB-' from 'BB+'. The upgrade of these securities follows their change in status to secured obligations sharing first liens on specific Idaho timberlands with the new secured revolver. The Ratings Outlook has been revised to Stable from Positive. PCH has just spun out the common shares of Clearwater Paper Corporation (Clearwater) to its shareholders. Clearwater owns the tissue, pulp and paperboard businesses of PCH and the Lewiston Idaho wood products facility. PCH will retain its 1.6 million acres of timberland and its existing lumber, plywood and particleboard facilities, apart from Lewiston. The spin-off is credit positive as it relieves PCH of the majority of its capital budget and operations which have not yielded returns commensurate with those earned in the timberland business. Clearwater paid PCH $50 million prior to the distribution of its shares and will owe PCH the debt service on its $100 million of credit sensitive debentures maturing a year from now. Should Clearwater be unable to pay PCH the principal of these bonds by their maturity, Clearwater will secure its obligation to PCH with the Cypress Bend Arkansas pulp and paperboard mill. Clearwater's payment is contingent upon its free cash flow which may be impaired by the recession and/or its inability to finance the payment in otherwise tight credit markets. The affirmation of PCH's IDR and the change in the Rating Outlook consider potentially higher leverage if Clearwater fails to make its payments on time as well as changing business conditions in 2009 that are not expected to flatter PCH's wood products or logging operations. Wood products is heavily influenced by housing starts which have been declining, and PCH's logging operations are heavily influenced by housing starts and the pulp markets which have started to decline. The adverse mix of these circumstances could push PCH's leverage to 3.5 times (x) debt/EBITDA by Fitch's estimates before business improves. This could adjust down quickly to 2.5x if Clearwater satisfies its obligations. At the end of the third quarter before the spin-off of Clearwater, PCH's leverage ratio was 2.4x. PRESERVE LLC: May Borrow Up to $2,000,000 from Scott Krentel ------------------------------------------------------------ The U.S. Bankruptcy Court for the Central District of California granted The Preserve, LLC, permission to borrow up $2 million from Scott Krentel, the managing director of Beaumont 1600, which funding will be used for the Debtor's postpetition cash needs. Beaumont 1600, a California Limited Liability Company, is the manager of the Debtor. As security for the payment of the loan, Mr. Krentel is granted junior liens on 112 acres of vacant land in Riverside County, California, an office building in the downtown business district of Riverside, California and a senior lien on a fully entitled finished residential model home in the City of Adelanto, County of San Bernardino, California. To the extent that the security granted to Mr. Krentel is insufficient to fully secure the loan, Mr. Krentel is granted an administrative expense under Sec. 503(b)(1) of the Bankruptcy Code, junior to any fees of professionals employed by the Debtor under Sec. 327. The loan will bear interest at the rate of 12% p.a., and will be due and payable on the earlier of the sale or refinance of any of the Debtor's real estate assets or Dec. 31, 2009. Riverside, California-based The Preserve, LLC is in the business of acquiring and making real estate investments. The company filed for Chapter 11 relief on Sept. 25, 2008 (Bankr. C. D. Calif. No. 08-23006). Jeffrey W. Broker, Esq., at Broker & Associates Professional Corporation assists the company in its restructuring efforts. The company listed assets of $100 million to $500 million and debts of $10 million to $50 million. PUEBLO OF SANTA ANA: Industry to Remain Under Pressure in 2009 -------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) QUEBECOR WORLD: Four Directors Step Down from Board --------------------------------------------------- Quebecor World Inc. said that its board vice-chairmen Pierre Karl Peladeau and Erik Peladeau, and audit committee chairmen Jean Neveu and Jean La Couture have resigned from the Board of Directors. The officers also serve on the boards of Quebecor Inc. and Quebecor Media Inc., and have determined that their resignations are advisable, as a result of the claims that have been filed by Quebecor Inc. and its subsidiaries as part of Quebecor World's court protected restructuring process. The company's lead director Alain Rheaume was named chairman of the audit committee of the company and was added as a member of the restructuring committee. On the one hand, Andre Caille was appointed as member of the audit committee. he continues to chair the restructuring committee along with Mr. Rheaume, Michele Desjardins and Jacques Mallette. Quebecor World does not believe the above mentioned resignations will impact its plan to exit creditor protection as a strong company in its industry. About Quebecor World Based in Montreal, Quebec, Quebecor World Inc. (TSX: IQW) (NYSE: IQW) -- http://www.quebecorworldinc.com/-- provides market solutions, including marketing and advertising activities, well as print solutions to retailers, branded goods companies, catalogers and to publishers of magazines, books and other printed media. It has 127 printing and related facilities located in North America, Europe, Latin America and Asia. In the United States, it has 82 facilities in 30 states, and is engaged in the printing of books, magazines, directories, retail inserts, catalogs and direct mail. The company has operations in Mexico, Brazil, Colombia, Chile, Peru, Argentina and the British Virgin Islands. Ernst & Young, Inc., the monitor of Quebecor World Inc., and its affiliates' reorganization proceedings under the Canadian Companies' Creditors Arrangement Act, filed a petition under Chapter 15 of the Bankruptcy Code before the U.S. Bankruptcy Court for the Southern District of New York on September 30, 2008, on behalf of QWI (Bankr. S.D.N.Y. Case No. 08-13814). The chapter 15 case is before Judge James M. Peck. Kenneth P. Coleman, Esq., at Allen & Overy LLP, in New York, serves as counsel to the chapter 15 petitioner. QWI and certain of its subsidiaries commenced the CCAA proceedings before the Quebec Superior Court (Commercial Division) on January 20, 2008. The following day, 53 of QWI's U.S. subsidiaries, including Quebecor World (USA), Inc., filed petitions under Chapter 11 of the U.S. Bankruptcy Code. The Honorable Justice Robert Mongeon oversees the CCAA case. Francois-David Pare, Esq., at Ogilvy Renault, LLP, represents the Company in the CCAA case. Ernst & Young Inc. was appointed as Monitor. Quebecor World (USA) Inc., its U.S. subsidiary, along with other U.S. affiliates, filed for chapter 11 bankruptcy before the U.S. Bankruptcy Court for the Southern District of New York (Lead Case No. 08-10152). Anthony D. Boccanfuso, Esq., at Arnold & Porter LLP, represents the Debtors in their restructuring efforts. The Official Committee of Unsecured Creditors is represented by Akin Gump Strauss Hauer & Feld LLP. Based in Corby, Northamptonshire, Quebecor World PLC -- http://www.quebecorworldplc.com/-- is the U.K. subsidiary of Quebecor World Inc. that specializes in web offset magazines, catalogues and specialty print products for marketing and advertising campaigns. The company employs around 290 people. Quebecor PLC was placed into administration with Ian Best and David Duggins of Ernst & Young LLP appointed as joint administrators effective Jan. 28, 2008. QWI is the only entity involved in the CCAA proceedings that is not a Debtor in the Chapter 11 Cases. As of June 30, 2008, Quebecor World's unaudited consolidated balance sheet showed total assets of $3,412,100,000 total liabilities of $4,326,500,000 preferred shares of $62,000,000 and total shareholders' deficit of $976,400,000. The Hon. Robert Mongeon of the Quebec Superior Court has extended until Dec. 14, 2008, the stay under the Canadian Companies' Creditors Arrangement Act. REAL ESTATE ASSET: Moody's Affirms Low-B Ratings on Six Classes --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 18 classes of Real Estate Asset Liquidity Trust, Commercial Mortgage Pass- Through Certificates, Series 2006-3: -- Class A-1, $197,979, affirmed at Aaa; previously assigned Aaa on 11/29/2006 -- Class A-2, $165,826,000, affirmed at Aaa; previously on assigned Aaa on 11/29/2006 -- Class XP-1, Notional, affirmed at Aaa; previously assigned Aaa on 11/29/2006 -- Class XP-2, Notional, affirmed at Aaa; previously assigned Aaa on 11/29/2006 -- Class XC-1, Notional, affirmed at Aaa; previously assigned Aaa on 11/29/2006 -- Class XC-2, Notional, affirmed at Aaa; previously assigned Aaa on 11/29/2006 -- Class B, $9,329;000, affirmed at Aa2; previously assigned Aa2 on 11/29/2006 -- Class C, $9,969,000, affirmed at A2; previously assigned A2 on 11/29/2006 -- Class D-1, $1,000, affirmed at Baa2; previously assigned Baa2 on 11/29/2006 -- Class D-2, $9,414,000, affirmed at Baa2; previously assigned Baa2 on 11/29/2006 -- Class E-1, $1,000, affirmed at Baa3; previously assigned Baa3 on 11/29/2006 -- Class E-2, $3,726,000, affirmed at Baa3; previously assigned Baa3 on 11/29/2006 -- Class F, $3,557,000, affirmed at Ba1; previously assigned Ba1 on 11/29/2006 -- Class G, $1,235,000, affirmed at Ba2; previously assigned Ba2 on 11/29/2006 -- Class H, $1,065,000, affirmed at Ba3; previously assigned Ba3 on 11/29/2006 -- Class J, $1,065,000, affirmed at B1; previously assigned B1 on 11/29/2006 -- Class K, $937,000, affirmed at B2; previously assigned B2 on 11/29/2006 -- Class L, $298,000, affirmed at B3; previously assigned B3 on 11/29/2006 Moody's affirmed the ratings of this Canadian deal due to overall stable pool performance. Moody's weighted average loan to value ratio for the conduit is 85% compared to 86% at securitization and only one of the five loans with underlying ratings has seen negative credit migration. As of the November 12, 2008 distribution date, the transaction's aggregate certificate balance has decreased by approximately 4% to $408.5 million from $426.0 million at securitization. The Certificates are collateralized by 58 loans, ranging in size from less than 1% to 7% of the pool, with the top 10 conduit loans representing 36% of the pool. The pool includes five loans with underlying ratings, representing 27% of the pool. The pool has not realized any losses since securitization and currently there are no loans in special servicing. One loan, representing 5.8% of the pool, is on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Moody's was provided with year-end 2007 operating results for 94% of the pool. The largest loan with an underlying rating is the Clearbrook Town Square Loan ($30.1 million -- 7.4%), which is secured by a 188,000 square foot community shopping center located in Abbotsford, British Columbia. The center was 99% occupied as of January 2008, essentially the same as at securitization. The center is anchored by Canada Safeway, which occupies 30% of the premises through October 2012. Performance has been stable since securitization. The loan sponsors are RioCan REIT and Kimco North Trust 1. The loan is 100% recourse to RioCan REIT. Moody's current underlying rating is Baa2, the same as at securitization. The second loan with an underlying rating is the Place 9-6 Senior Interest Loan ($23.5 million -- 5.8%), which is secured by a 151,000 square foot Class B office building located in downtown Calgary, Alberta. The property was 99% occupied as of May 2008, the same as at securitization. However, in October 2008 the occupancy dropped to 40% due to the lease expiration of Golder Associates Ltd. Although the Class B downtown Calgary submarket is relatively strong, with an estimated vacancy rate of 5% as of the third quarter 2008, it has weakened somewhat since securitization and Moody's anticipates a challenging leasing environment going forward. The loan is 100% recourse to the sponsor, Riaz Mamdani. Moody's current underlying rating is Ba2 compared to Baa3 at securitization. The third loan with an underlying rating is the Suncor Building Loan ($20.1 million -- 4.9%), which is secured by a 140,000 square foot industrial property located in Fort McMurray, Alberta. The anchor tenant is Suncor Energy Inc. (Moody's senior unsecured debt rating -- A3, stable outlook), which leases 97% of the premises through December 2018. Moody's current underlying rating is Baa3, the same as at securitization. The fourth loan with an underlying rating is the Marriott Montreal Loan ($19.7 million -- 4.8%), which is secured by a 190 room Residence Inn hotel located in downtown Montreal, Quebec. Moody's current underlying rating is Baa2, the same as at securitization. The fifth loan with an underlying rating is the Harry Rosen Building ($17.2 million -- 4.2%), which is secured by a 34,000 square foot retail building located in Toronto, Ontario. The property is 100% occupied by Harry Rosen Inc. through September 2012. Moody's current underlying rating is Aa1, the same as at securitization. Reported financial information indicates that the performance of these loans is in line with Moody's original expectations. The top three conduit loans represent 15.1% of the pool. The largest conduit loan is the Beedie Group -- Langley Loan ($22.1 million -- 5.4%), which is secured by five industrial buildings in Langley, British Columbia totaling 306,000 square feet. The properties were 96% occupied as of March 2008 compared to 100% at securitization. Moody's LTV is 89% compared to 81% at securitization. The second largest conduit loan is the Park Lane Mall & Terraces Loan ($20.8 million -- 5.1%), which is secured by a 265,000 square foot enclosed retail mall and a 99,000 square foot office building located in Halifax, Nova Scotia. The property was 86% occupied as of January 2008, essentially the same as at securitization. Moody's LTV is 73% compared to 77% at securitization. The third largest conduit loan is the Opus Hotel Loan ($18.6 million -- 4.6%), which is secured by a 96 room full service boutique hotel located in Vancouver, British Columbia. The hotel's performance had been relatively stable through 2007. However performance in 2008 dropped due to a decline in business and tourist travel and near by street construction which has caused problems with access. The loan is 60 days delinquent and the borrower has indicated that cash flow problems may impact debt service payments for the remainder of the year. Moody's LTV is 106% compared to 84% at securitization. Moody's monitors transactions both on a monthly basis through a quantitative tool: MOST(R) (Moody's Surveillance Trends) and a periodic basis through a full review. Moody's prior full review is summarized in a Pre Sale Report dated November 10, 2006. ROBERT ORR: Files for Bankruptcy to Keep Brooke & Aleritas Afloat ----------------------------------------------------------------- Robert Orr filed personal bankruptcy after pledging his family fortune trying to save Brooke Capital Corporation, an insurance agency franchisor and a public company, and Aleritas Capital Corp., a finance company specializing in insurance lending and a public company of which Orr's family indirectly owned approximately 29%. Aleritas loaned money to insurance agencies, then packaged the loans as securities and sold them to Wall Street investors. To enhance the credit quality of these securities, Brooke Capital provided franchising and consulting services to insurance agency borrowers on behalf of the Wall Street investors. The refusal of Wall Street investors to pay servicing fees for the consulting and collateral preservation services provided by Brooke Capital caused the insurance agency franchisor to collapse from cash flow shortages and the finance company to collapse from deterioration of loan quality because the insurance agency franchisor could no longer afford to provide these critical services to the finance company's borrowers. The meltdown of these companies accelerated when a special master, who was appointed by the court to maintain the status quo until Brooke Capital's differences with Wall Street investors were resolved, instead liquidated assets and released insurance agency franchisees from their agreements. With Brooke Capital in bankruptcy and Aleritas in liquidation, it is unlikely Orr will see repayment of approximately $12,000,000 that his family loaned to the companies in recent months. Another result of the companies' collapse is that Orr will be required to repay approximately $25,000,000 of debt that was personally guaranteed by him as part of Orr's efforts in recent months to turn around the companies. "Last year I retired as a company executive, but I came out of retirement in April of this year to help Aleritas, and later Brooke Capital, through difficult economic times," Mr. Orr said. "With the benefit of hindsight, I regret returning as a company executive because the price paid by my family has been extraordinary. I have endured financial ruin and unwarranted personal attacks," he said "As an executive taking over management of these troubled companies just prior to their collapse and as an executive responsible for making the difficult decisions required to turnaround these troubled companies, I have become the target of attack for anyone with a complaint," Mr. Orr continued. Last year, as a result of merging wholly owned Brooke Capital and wholly owned Aleritas into existing public companies, most of the stock of Aleritas and Brooke Capital became directly, or indirectly, owned by public investors. "When Aleritas and Brooke Capital became public companies last year, I believed that I could slow down after a lifetime of 60-70 hour weeks," Mr. Orr related. "I believed that my involvement as an executive was not required because, as an investor in public companies, my investment would be protected by the management accountability demanded by independent directors, exchange listing provisions, sophisticated investors and auditors," Mr. Orr added. After Aleritas became a public company, Orr did not serve as a director or officer. After Brooke Capital became a public company, Orr remained as a director but relinquished all executive responsibilities. Mr. Orr said, "In March of this year it became apparent that I was naive to rely on public company safeguards to protect my investment in Aleritas." Aleritas had become financially troubled primarily as a result of increased loan losses, a failed refinancing transaction and rapid expansion in a difficult economy. In response to a request from Aleritas' largest purchaser of loan participations, Orr asked for an emergency meeting of the Aleritas board on March 31, 2008 to demand the changes required for a turnaround of the company, including the appointment of Orr as interim chief executive officer of Aleritas until the company found a capable replacement with turnaround experience. Over the next several weeks, Mr. Orr announced to investors: a) a $24 million charge for loan losses and credit impairments, b) suspension of the company's growth plans; and c) the proposed steps to complete the failed refinancing transaction. During the five months that Mr. Orr and Michael Hess were Aleritas executives, many unpopular and difficult decisions were implemented which they believed were required to turn the company around, including: a) working with Brooke Capital to mitigate loan losses despite previous tensions between Aleritas and Brooke Capital; b) negotiating with recalcitrant Wall Street investors for payment of servicing fees to assure Brooke Capital's continued assistance; c) negotiating with lenders to remedy liquidity concerns; and d) reducing the amounts of collateral pledge and loan payment discrepancies existing on March 31st when Orr and Hess became Aleritas executives. Especially difficult were the decisions made to reduce collateral pledge and loan payment discrepancies because this involved decisions regarding payment priorities and collateral quality. Mr. Orr and Hess first required the completion of conversion to a new loan accounting process to better track and control collateral pledges and loan payments. Although discrepancies were significantly reduced after March 31st, the resolution of those discrepancies existing on March 31st sometimes evolved into different discrepancies as Orr and Hess tried to fairly resolve these issues. Brooke Capital has historically provided critical assistance to franchise agency borrowers as part of a servicing agreement with Wall Street investors. During August Brooke Capital experienced significant cash flow problems because Wall Street investors refused to pay past due servicing fees owed to Brooke Capital. Apparently frustrated that they could not collect past due servicing fees and resolve the company's cash flow problems, Brooke Capital's chief executive officer, chief operating officer, senior vice president and general counsel resigned. Mr. Orr reluctantly stepped in on August 19th to fill the management void in Brooke Capital and aggressively pursued collection of past due servicing fees during the ensuring month that he served as Brooke Capital's chief executive officer. Allegations of funds misappropriation leveled against Orr by WallStreet investors were primarily the result of Brooke Capital offsetting the past due amounts it was owed from Wall Street investors by the amounts that Brooke Capital owed to Wall Street investors. These offsets were approved by Brooke Capital's legal counsel and summarized in a court motion. The dispute between Wall Street investors and Brooke Capital culminated in the appointment of a special master on Sept. 17, 2008, and the resulting collapses of Aleritas and Brooke Capital. Mr. Orr summarized by saying, "Until the meltdown caused by Wall Street investors, I was confident that Aleritas and Brooke Capital were taking the difficult steps required to turn around the companies. As a result, my family did not sell any stock -- until it was seized by the creditors for repayment of a company loan -- and instead purchased approximately $2,000,000 in additional stock during 2008. I believed in Aleritas and Brooke Capital." ROBERT ORR: Case Summary & 18 Largest Unsecured Creditors --------------------------------------------------------- Debtor: Robert Dean Orr P.O. Box 267 Phillipsburg, KS 67661 Bankruptcy Case No.: 08-13242 Chapter 11 Petition Date: December 16, 2008 Court: District of Kansas (Wichita) Debtor's Counsel: J. Michael Morris, Esq. jmmorris@kmazlaw.com 301 N. Main St., Suite 1600 Wichita, KS 67202 Tel: (316) 267-0331 Estimated Assets: $100,000 to $500,000 Estimated Debts: $50,000,000 to $100,000,000 The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ First United Bank - $13,853,044 7626 W. Lincoln Hi-way Frankfort, IL 60475 ONB Bank and Trust Company - $11,500,000 2424 E. 21st Street Tulsa, OK 74114 Citizens Bank - $9,458,869 1210 Washington Street Chillicothe, MO 64601 United Bank and Trust - $5,071,112 Fifth Third Bank - $2,700,000 Brooke Holdings - $2,578,985 Security State Bank - $2,000,000 NCMIC - $1,500,000 Enterprise Bank - $700,000 Enterprise Bank - $700,000 Kaw Valley State Bank - $200,000 Wanda Schmidt - $50,000 Chase Manhattan - $17,168 Chase Manhattan - $12,997 Kimba Orr - $10,000 Chase Manhattan - $8,070 Citizens Bank - $8,000 Expedia Credit Card - $5,700 The petition was signed by Robert Dean Orr, the debtor. ROCKET RESTAURANT: Files for Chapter 11 Protection in Colorado -------------------------------------------------------------- Denver Business Journal reports that Rocket Restaurant Ventures LLC filed for Chapter 11 protection before the U.S. Bankruptcy Court for the District of Colorado on Dec. 15, 2008. According to Denver Business, Rocket Restaurant listed assets of less than $100,000. Rocket Restaurant said in court documents that it had $1 million to $10 million in liabilities. Court documents say that Rocket Restaurant's largest creditor is Monfort Capital LLC of Eaton, which holds a $880,000 claim. Denver Business states that other creditors include: -- Taubman Cherry Creek LP, which owns the Cherry Creek Shopping Center; -- Rouse Park Meadows, which owns the Park Meadows mall in Littleton; and -- Robinson Dairy of Denver. Denver Business relates that David and Jennifer Giesen, an entrepreneur who built Steak Escape and Johnny Rockets restaurants, also filed for Chapter 11 protection, listing assets of $1 million to $10 million and liabilities of $1 million to $10 million. Mr. Giesen, says Denver Business, formed a joint venture with Charlie Monfort, in 2000 to open about 100 Steak Escape restaurants in Colorado and California over a 10-year period. Mr. Giesen at that time had six Steak Escapes in metro Denver, including a location at the Denver International Airport, the report states. According to the report, Mr. Giesen opened Johnny Rockets restaurants in metro Denver, including locations on the 16th Street Mall in downtown Denver and inside the Cherry Creek Shopping Center. Published reports say that in 2003, the Giesen Restaurant Enterprises closed a dozen Steak Escapes nationwide. SASI FINANCE: Moody's Corrects December 8 Ratings Release --------------------------------------------------------- Moody's Investors Service said that due to a data input error, three tranches were incorrectly placed on review on December 8, 2008. The ratings are confirmed for these tranches with corrected data. The revised release states: Moody's Investors Service has downgraded the ratings of twelve tranches and confirmed the ratings of three tranches in the SASI Finance Limited Partnership 2006-A and the RESIX Finance Limited Credit-Linked Notes, Series 2006-1 transactions. The certificates and notes are protected through subordination, including a non- amortizing unrated tranche. The synthetic transaction provides the owner of a sizable pool of jumbo mortgages credit protection similar to the credit enhancement provided through subordination in conventional residential mortgage backed securities (RMBS) transactions. The reference portfolio includes prime conforming and nonconforming balance fixed-rate and adjustable-rate mortgages purchased from various originators. The portfolio is generally static as in most RMBS deals. Through an agreement with the securities issuer, the Protected Party pays a fee for the transfer of a portion of the portfolio risk. Investors in the securities have an interest in the holdings of the issuer, which include highly rated investment instruments, a forward delivery agreement and fee collections on the agreement with the Protected Party. Investors are exposed to risk from the reference portfolio but benefit only indirectly from cash flows from these assets. The actions are triggered by higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to currently available credit enhancement levels. The actions listed reflect Moody's revised expected losses on the Jumbo sector announced in a press release on September 18th, and are part of Moody's on-going review process. The ratings on the notes are monitored by evaluating factors determined to be applicable to the credit profile of the notes, such as i) the nature, sufficiency, and quality of historical performance information regarding the asset class ii) an analysis of the collateral being securitized, iii) an analysis of the transaction's allocation of collateral cashflow and capital structure, and (iv) a comparison of these attributes against those of other similar transactions. Moody's calculates estimated losses for Jumbo RMBS in a two-stage process. First, serious delinquencies are projected through late 2009, primarily based upon recent historical performance. These projected delinquencies are converted into projected losses using lifetime roll rates (the probability of transition to default) averaging 40% for 60-day delinquencies, 75% for delinquencies greater than 90 days, and 90-100% for foreclosure or REO, and severity assumptions averaging 35%. The second step is to determine losses for the remaining life of the deal, following the projection period. Depending on a deal's performance, including delinquency, default, and prepayment rates, as well as collateral characteristics, such as loan type (fixed or adjustable), or loan-to-value ratios and geographic concentrations of remaining current loans, Moody's assumes varying degrees of slowing in the loss rate (which is measured by loss-to- liquidation) for the remaining life of the deal. Typical degrees of slowing in loss rate after late 2009 range from no slowing at all to 40% slowing. To take an example, a deal with very poor early performance due to relatively high loan-to-value ratios and dropping regional home values would be expected to see markedly high delinquency and loss rates for the next year. But the high rate of losses may be expected to slow afterwards, as economic factors and real estate values begin to stabilize, and a slowing of 20-40% may be used in the projection. On the other hand, a deal with stronger early performance that is demonstrating relative resiliency in the current market environment may not be expected to have high losses in the near-term, but may be expected to sustain a similar level of losses for the life of the deal, as the pool continues to be subject to factors that have more historically driven prime performance such as borrower life events, unemployment, and so on. Loss estimates are subject to variability and, as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly if necessary. The credit-linked notes in the RESIX shelf replicate the cash flow of synthetic RMBS securities issued: RESIX Finance Limited Credit-Linked Notes, Series 2006-1 replicates the cash flows of Class B7, Class B8, Class B9 and Class B10 issued by the SASI Finance Limited Partnership 2006-A, Sovereign Asset Synthetic Investment Securities, Series 2006-A transaction -- Issuer: RESIX Finance Limited Credit-Linked Notes, Series 2006-1 Cl. B7 Notes, Downgraded to B3, previously on 12/8/2008 Baa3 Placed under Review for Possible Downgrade Cl. B8 Notes, Downgraded to Caa2, previously on 12/8/2008 Ba2 Placed under Review for Possible Downgrade Cl. B9 Notes, Downgraded to Ca, previously on 12/8/2008 B3 Placed under Review for Possible Downgrade Cl. B10 Notes, Downgraded to Ca, previously on 12/8/2008 Caa2 Placed under Review for Possible Downgrade -- Issuer: SASI Finance Limited Partnership 2006-A, Sovereign Asset Synthetic Investment Securities, Series 2006-A Cl. A Tranche exposure, Confirmed at Aaa, previously on 12/8/2008 Aaa Placed under Review for Possible Downgrade Cl. B1 Tranche exposure, Confirmed at Aa1, previously on 12/8/2008 Aa1 Placed under Review for Possible Downgrade Cl. B2 Tranche exposure, Confirmed at Aa1, previously on 12/8/2008 Aa1 Placed under Review for Possible Downgrade Cl. B3 Notes, Downgraded to A1, previously on 12/8/2008 Aa3 Placed under Review for Possible Downgrade Cl. B4 Notes, Downgraded to A2, previously on 12/8/2008 Aa3 Placed under Review for Possible Downgrade Cl. B5 Notes, Downgraded to Baa1, previously on 12/8/2008 A2 Placed under Review for Possible Downgrade Cl. B6 Notes, Downgraded to Ba1, previously on 12/8/2008 A3 Placed under Review for Possible Downgrade Cl. B7 Notes, Downgraded to B3, previously on 12/8/2008 Baa3 Placed under Review for Possible Downgrade Cl. B8 Notes, Downgraded to Caa2, previously on 12/8/2008 Ba2 Placed under Review for Possible Downgrade Cl. B9 Certificate, Downgraded to Ca, previously on 12/8/2008 B3 Placed under Review for Possible Downgrade Cl. B10 Certificate, Downgraded to Ca, previously on 12/8/2008 Caa2 Placed under Review for Possible Downgrade SEMGROUP LP: Catsimatidis to Meet Senior Mgt. Monday ---------------------------------------------------- John A. Catsimatidis, chairman of the Red Apple Group of New York, is planning to meet with the senior management of SemGroup, L. P., in Tulsa next Monday to begin the process of formulating a plan of reorganization for the company. "I am very pleased with the spirit of cooperation demonstrated by everyone I have met so far," Mr. Catsimatidis said. "We have been reaching out to obtain input from SemGroup's management team and certain of its creditors." "Although I have not yet had any discussions with Bank of America, in its capacity as Administrative Agent for the Senior Secured Lenders, it has been stated to me that the bank will consider with its lender group any proposal that I make," Mr. Catsimatidis said. Mr. Catsimatidis said on Dec. 15, 2008, that he had obtained five of the nine seats on SemGroup G. P., L. L. C.'s Management Committee, the equivalent of SemGroup L. P.'s board of directors. Next week in Tulsa, Mr. Catsimatidis will seek the input of management and the company's restructuring professionals as a part of the process of putting together a reorganization plan on behalf of the company. "Our team intends to work hard on a proposal to take to SemGroup's Management Committee," Mr. Catsimatidis said. "We are working toward creating a consensual plan acceptable to all parties to the proceeding. We intend to have a preliminary plan ready for consideration in January, 2009." About SemGroup SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. SEMGROUP LP: Court Extends Plan Filing Deadline to March 19 ----------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware granted the request of SemGroup L.P. and its debtor-affiliates for an extension of their exclusive right to file a plan of reorganization and solicit acceptances of that plan. Specifically, the Court extended (i) the Plan Filing Period until March 19, 2009, and (ii) the Solicitation Period until May 19, 2009. The Debtors originally sought for an extension of the Plan Filing Period to February 19, 2009, and the Solicitation Period to April 20, 2009. The Official Committee of Unsecured Creditors, before the Court entered into the order, said it does not oppose the Debtors' request for an extension of exclusivity. The Debtors' decision, according to the Committee, is based, at least in part, on their positive statements in the Motion, namely that despite the size and complexity, the Debtors believe that they are now well- situated to move forward in the process of developing a consensual chapter 11 plan after making a material progress in their Chapter 11 cases. However, the Committee pointed out that in the event the Debtors seek an additional extension of exclusivity, the Court should require the Debtors to make an affirmative showing of clear progress made toward a plan of reorganization. The Committee said the Debtors have not held any substantive plan discussions with the key constituencies in their bankruptcy cases. The Committee hopes and expects that between December 2008 and March 19, 2008, the Debtors will focus their efforts on making significant progress toward restructuring their businesses and emerging from Chapter 11. Katherine Good, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, in a certificate, stated that no other response or objection other than the Committee's response was received. The Court ruled that all objections to the Motion are resolved, withdrawn, or otherwise overruled by the Court. About SemGroup SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. (SemGoup Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SEMGROUP LP: Ex-CEO of Energy Unit & Other Parties Oppose Probe --------------------------------------------------------------- Sharon Pens, former executive assistant to the president and chief executive officer of non-debtor SemGroup Energy Partners, LP, objects to the Semgroup, L.P.'s discovery requests and relates that she has been completely denied access to the Partnership's information since she was required to immediately vacate her Tulsa, Oklahoma office in July 2008. Pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure, the Debtors have sought permission from the U.S. Bankruptcy Court for the District of Delaware to require Kevin Foxx, former Chief Operating Officer of SemGroup, L.P., Sharon Pens, former assistant to Thomas L. Kivisto, and Gregory P. Price, Mr. Kivisto's accounting assistant, to produce certain documents and to appear for examination. The Court has already authorized Louis J. Freeh, Esq., the Chapter 11 Examiner, to conduct examinations of the Debtors' current and former officers, directors and employees, as well as their auditors, corporate counsel, lenders, investors, and other counterparties to certain financial transactions, in connection with his investigation in the prepetition trading practices of SemGroup, L.P. and its affiliates. Mr. Freeh has confirmed that he has served subpoenas to Thomas L. Kivisto, Sharon Pens, and Gregory Wallace. Ms. Pens tells the Court that since that time she has been unable to review or copy a single document, file or record concerning matters related to the Debtors, or to matters related to any other business entity for which she was employed or maintained records. Ms. Pen also complains that the Debtors' requested discovery ignores the significant implications of unfocused inquiries into matters that are, or may be, the subject of her counsel's work product, and privileged communications between her and her attorney. SemGroup Energy, in response, asks the Court to allow it to participate in the oral examination of its president and chief executive officer, Kevin Foxx, and limit his examination at one day. Bank of America, N.A., agent for the prepetition and postpetition lenders, asserts that the Debtors' Rule 2004 Motion should be held in abeyance until the conclusion of the Chapter 11 Examiner's investigation. The Debtors, BofA insists, should be prohibited from duplicating any of the Examiner's efforts. Fortis Bank, SA/NV, and Fortis Capital Corp., requests that any relief granted by the Court be expanded to include authorization for Fortis to (i) attend the oral examination of each of the Respondents under Rule 2004 of the Federal Rules of Bankruptcy Procedures, and (ii) receive copies of any documents produced by the Respondents to the Debtors in connection with the Rule 2004 Motion as and when those documents are produced by the Respondents. PricewaterhouseCoopers LLP, joins in Fortis' request. Debtors Address Objections The Debtors tell the Court that they do not object to the Partnership's attendance in Mr. Foxx's examination. However, the Debtors argue that it is inappropriate to limit Mr. Foxx's examination at this early stage in the litigation. In response to Ms. Pen's objection, the Debtors insist that their Rule 2004 discovery requests on Ms. Pen are all related to the effective administration of the Debtors' estates and do not exceed the broad scope of discovery permitted pursuant to Rule 2004. The Debtors insist that the Court should grant their Rule 2004 Motion because they have established the necessity of deposing Ms. Pens and obtaining documents within her possession. The Official Committee of Unsecured Creditors tells the Court that it supports the Debtors' Rule 2004 Motion for the simple, yet critical, reason that granting the motions will expedite the Chapter 11 Examiner's investigation of the Respondents. The Committee says it has come together with the Debtors and the Chapter 11 Examiner and reached an agreement themed in cooperation and coordination with respect to the significant "discovery exercise" that is the Examiner's investigation. About SemGroup SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. (SemGoup Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SEMGROUP LP: Examiner Seeks to Retain Morrison as Counsel --------------------------------------------------------- Louis J. Freeh, the appointed examiner for the Chapter 11 cases of SemGroup L.P., sought and obtained permission from the U.S. Bankruptcy Court for the District of Delaware to retain Morrison & Foerster LLP, as his counsel, effective as of October 19, 2008 The Examiner told the Court that Morrison is an internationally recognized law firm, having extensive experience and expertise in the field of debtors' and creditors' rights, business reorganizations and liquidations under Chapter 11 of the Bankruptcy Code. The Examiner retained Morrison to perform services in connection with his investigation of the Debtors' trading activities, pursuant to the Examiner's fiduciary duties and responsibilities under the Bankruptcy Code. As counsel, Morrison will: (a) take all necessary action to assist and advise the Examiner in discharging his duties and responsibilities under the Examiner Order and the Bankruptcy Code; (b) prepare motions, applications, notices, answers, orders, and documents on the Examiner's behalf; (c) appear in Court to represent the Examiner's interests; (d) analyze and advise the Examiner regarding any legal issues that arise in connection with the Examiner's investigation; (e) liaise with the United States Trustee, the Debtors' counsel, the Committee, the administrative agent for the Debtors' lenders, counsel for witnesses regarding the Investigation, and other parties-in-interest; (f) assist in preparing the Examiner's report; (g) perform all other necessary legal services on the Examiner's behalf; and (h) assist the Examiner in undertaking additional tasks that the Court may direct. The Debtors will pay Morrison according to the hourly rates for its professionals, including these principal professionals: Professional Hourly Rate ------------ ----------- Brett H. Miller, Esq. $750 Adam S. Hoffinger, Esq. $725 Melissa A. Hager, Esq. $595 Bruce J. Barnard, Esq. $550 Erica J. Richards, Esq. $395 Laura Guido, Paralegal $210 The Debtors will also reimburse Morrison for any necessary out- of-pocket expenses. Brett H. Miller, Esq., partner at Morrison, assured the Court that to the best of his knowledge, neither his firm nor any of its employees has any adverse interests with the Debtors, their creditors, or any other party in interest. Morrison is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code, he maintained. No party objected to the employment application, the Examiner certifies. About SemGroup SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. (SemGoup Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SEMGROUP LP: Holdings' Schedules Of Assets And Liabilities ---------------------------------------------------------- A. Real Property $0 B. Personal Property B.1 Cash on hand 0 B.2 Bank accounts Arvest Bank PO Box 3007 17,456,524 Bank of Oklahoma PO Box 2300 0 Bank of Oklahoma PO Box 2300 8,625,748 Bank of Oklahoma PO Box 2300 4,766 B.14 Interests in partnerships & joint venture Undetermined B.18 Other liquidated debts owing Debtor SemGroup, L.P. 150,000,000 SemCrude Pipeline, L.L.C. 50,000,000 SemMaterials, L.P. 4,000,000 TOTAL SCHEDULED ASSETS $230,087,038 ========================================================= C. Property Claimed as Exempt $0 D. Creditors Holding Secured Claims Manchester Securities and Alerian Finance 155,950,000 E. Creditors Holding Unsecured Priority Claims 0 F. Creditors Holding Unsecured Non-priority Claims SemCrude, L.P. 50,000,000 SemGroup, L.P. 14,741,624 G. Executory Contracts and Unexpired Leases 0 TOTAL SCHEDULED LIABILITIES $220,691,624 ========================================================= SemGroup Holdings, L.P., discloses that for the two-year period immediately preceding the Petition Date, it did not earn income other than from employment or from the operation of its business. However, it earned income other than from employment or business operations: Year Amount ---- ------ 2006 Other Income $0 2007 Other Income 340,926 9/30/2008 YTD Other Income 401,902 The Debtor made payments totaling $19,220, to creditors, excluding brokers, within the period from July 24, 2008, through October 21, 2008. It also paid $6,039 for costs related to debt counseling or bankruptcy, for the period from October 22, 2007 to October 21, 2008. In addition, SemGroup Holdings transferred $150,000,000 to SemGroup, L.P., on June 25, 2008, on account of a loan, via Manchester Securities Corporation and Alerian Finance Partners, LP. About SemGroup SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. (SemGoup Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SEMGROUP LP: Energy Unit's Forbearance Agreement Expires Today -------------------------------------------------------------- SemGroup Energy Partner, L.P., on December 11, 2008, obtained an extension of the forbearance agreement under its Amended and Restated Credit Agreement, dated February 20, 2008, with Wachovia Bank, National Association, as Administrative Agent, Letter of Credit Issuer and Swing Line Lender, Bank of America, N.A., as Syndication Agent and the other lenders. The Lenders agreed to extend the Forbearance Period until December 18, 2008. The Partnership, according to its filings with the Securities and Exchange Commission, is in productive dialogue with the lenders regarding entering into a new forbearance agreement on or prior to December 18, 2008, but no assurance can be given as to the outcome of those discussions. The Tulsa World said if the Partnership cannot extend the forbearance any further, the company might file for bankruptcy, following its parent. Some observers, however, pointed out that the Partnership survived two months in default without the initial forbearance deal, so the immediate lack of a new one may not push it to bankruptcy, the Tulsa World related. The Partnership defaulted on the $150,000,000 Credit Agreement after its Parent filed for bankruptcy in July 2008. About SemGroup SemGroup L.P. -- http://www.semgrouplp.com/-- is a midstream service company providing the energy industry means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminaling and storing energy. SemGroup serves customers in the United States, Canada, Mexico, Wales, Switzerland and Vietnam. SemGroup L.P. and its debtor-affiliates filed for Chapter 11 protection on July 22, 2008 (Bankr. D. Del. Lead Case No. 08- 11525). These represent the Debtors' restructuring efforts: John H. Knight, Esq., L. Katherine Good, Esq. and Mark D. Collins, Esq. at Richards Layton & Finger; Harvey R. Miller, Esq., Michael P. Kessler, Esq. and Sherri L. Toub, Esq. at Weil, Gotshal & Manges LLP; and Martin A. Sosland, Esq. and Sylvia A. Mayer, Esq. at Weil Gotshal & Manges LLP. Kurtzman Carson Consultants L.L.C. is the Debtors' claims agent. The Debtors' financial advisors are The Blackstone Group L.P. and A.P. Services LLC. Margot B. Schonholtz, Esq., and Scott D. Talmadge, Esq., at Kaye Scholer LLP; and Laurie Selber Silverstein, Esq., at Potter Anderson & Corroon LLP, represent the Debtors' prepetition lenders. SemGroup L.P.'s affiliates, SemCAMS ULC and SemCanada Crude Company, sought protection under the Companies' Creditors Arrangement Act (Canada) on July 22, 2008. Ernst & Young, Inc., is the appointed monitor of SemCanada Crude Company and its affiliates' reorganization proceedings before the Canadian Companies' Creditors Arrangement Act. The CCAA stay expires on Nov. 21, 2008. SemGroup L.P.'s consolidated, unaudited financial conditions as of June 30, 2007, showed $5,429,038,000 in total assets and $5,033,214,000 in total debts. In their petition, they showed more than $1,000,000,000 in estimated total assets and more than $1,000,000,000 in total debts. (SemGoup Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). SMITHFIELD FOODS: S&P Cuts Corporate Credit Rating to 'B' --------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Smithfield Foods Inc. to 'B' from 'BB-'. "At the same time, we removed the ratings from CreditWatch with negative implications where they were originally placed on Dec. 3, 2007, for weak operating performance in its hog production segment. The outlook is negative," S&P said. Smithfield, Va.-based Smithfield Foods had about $3.8 billion of debt (including capitalized operating leases and pension and postretirement obligations) as of Oct. 26, 2008. According to S&P: "The downgrade reflects weak credit metrics for the rating and our expectation that credit measures will not rebound to more appropriate levels in the near term. When we downgraded the company to 'BB-' on June 27, 2008, we indicated that we would likely affirm the ratings upon the completion of the divestiture of the company's beef segment to JBS S.A. (B+/Negative/--). The company did receive $580 million of proceeds from the sale of Smithfield Beef in October 2008, which was applied to debt reduction under the company's revolving credit facility. However, due to the decline in operating performance in the company's hog production segment, EBITDA margins and credit measures are weaker than we had previously expected. In our view, Smithfield Foods continues to face a very challenging operating environment in its hog production operations through the remainder of fiscal 2009 due to soft hog prices. Although feed costs have come down considerably over the last several months, those lower costs will take time to be realized in the company's operating results. We estimate that the company's cost for raising hogs is still well above selling prices. Furthermore, if pork producers in the industry do not continue to reduce livestock numbers (currently, the incentive -- high corn prices -- is no longer there), then selling prices will not strengthen in calendar 2009 (the company's fiscal 2010). This could curtail the turnaround Smithfield Foods anticipates for fiscal 2010." SOLUTIA INC: Supports $14BB Bailout for U.S. Automakers ------------------------------------------------------- "Solutia [Inc.] is in favor of federal relief for the U.S. automakers," GlssBytes.com quoted Paul J. Berra, vice president of government affairs and communications for Solutia, which indirectly relies on U.S.-based original equipment manufacturers for a small percent of its total revenue. "The U.S. OEMs employ hundreds of thousands of people, and permeate the broader U.S. economy through their supplier and dealer networks," Mr. Berra further stated. "During more normal economic conditions, the U.S. bankruptcy process provides the means for successful restructuring without the use of national policy -- as evidenced by Solutia's own recent emergence from Chapter 11 reorganization. Unfortunately, during today's uncertain economic times, the bankruptcy of large companies such as the U.S. OEMs would further accentuate our country's economic decline. Therefore, we believe the use of national policy is warranted." "We're a fan of the bailout. . . We believe that [General Motors Company] is much bigger than the company itself. It is a network of suppliers of which we are one," Republican Newsroom quoted Jay B. Nesbitt, manager of Solutia Inc.'s facility in Indian Orchard, Massachusetts. In the past month, GM and Chrysler LLC engaged in talks with the U.S. Government for a $14,000,000,000 rescue plan. On Dec. 11, 2008, the U.S. Senate rejected the bill in a 52-35 procedural vote. Both GM and Chrysler have both indicated that they could run out of cash "within weeks" if the rescue bill is not passed, the Republican Newsroom reported. Ford said it has enough cash through 2009. On Dec. 18, 2008, the Wall Street Journal reports that Chrysler will idle manufacturing operations at the end of December 19 for at least a month "to align production and inventory with U.S. market demand." GM halts production at a factory making engines for the Chevrolet Volt electric car to conserve cash, Bloomberg News says. Car-product manufacturers in Springfield, Massachusetts, are slowing their production as they "wait for the industry to reorganize and recover," Republican Newsroom noted. Market Intelligence Center noted that Solutia's stock "has been showing support around $4.65 and resistance in the $5.83 range." The company's stock has ranged from a low of $4.09 to a high of $18.00 for the past 52 weeks, according to MIC. Shareholders to Meet April 22 Meanwhile, Solutia (NYSE: SOA) announced that its Board of Directors has set Wednesday, April 22, 2009, as the date for its annual meeting of shareholders. The meeting will take place at the company's headquarters in Town and Country, Mo. The record date for the annual meeting is February 24, 2009. About Solutia Inc. Based in St. Louis, Missouri, Solutia Inc. (NYSE: SOA) -- http://www.solutia.com/-- and its subsidiaries, manufactures and sells chemical-based materials, which are used in consumer and industrial applications worldwide. The company and 15 debtor-affiliates filed for chapter 11 protection on Dec. 17, 2003 (Bankr. S.D.N.Y. Lead Case No. 03- 17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., Jonathan S. Henes, Esq., and Michael A. Cohen, Esq., at Kirkland & Ellis LLP, in New York, as lead bankruptcy counsel, and David A. Warfield, Esq., and Laura Toledo, Esq., at Blackwell Sanders LLP, in St. Louis Missouri, as special counsel. Trumbull Group LLC is the Debtor's claims and noticing agent. Daniel H. Golden, Esq., Ira S. Dizengoff, Esq., and Russel J. Reid, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Official Committee of Unsecured Creditors, and Derron S. Slonecker at Houlihan Lokey Howard & Zukin Capital provides the Creditors' Committee with financial advice. The Official Committee of Retirees of Solutia, Inc., et al., is represented by Daniel D. Doyle, Esq., Nicholas A. Franke, Esq., and David M. Brown, Esq., at Spencer Fane Britt & Browne, LLP, in St. Louis, Missouri, and Frank M. Young, Esq., Thomas E. Reynolds, Esq., R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, in Birmingham, Alabama. On Feb. 14, 2006, the Debtors filed their Reorganization Plan & Disclosure Statement. On May 15, 2007, they filed an Amended Reorganization Plan and on July 9, 2007, filed a 2nd Amended Reorganization Plan. The Bankruptcy Court approved the Debtors' amended Disclosure Statement on Oct. 19, 2007. On Oct. 22, 2007, the Debtor re-filed a Consensual Plan & Disclosure Statement and on Nov. 29, 2007, the Court confirmed the Debtors' Consensual Plan. Solutia emerged from chapter 11 protection Feb. 28, 2008. Solutia's $2.05 billion exit financing facility was funded by Citigroup Global Markets Inc., Goldman Sachs Credit Partners L.P., and Deutsche Bank Securities Inc. The exit financing is being used to pay certain creditors, and for ongoing operations. (Solutia Bankruptcy News, Issue No. 136; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * Standard & Poor's Ratings Services said its ratings on Solutia Inc. (B+/Stable/--) will not change as a result of the company's recent announcement of a public offering of common shares. SOLUTIA INC: Court OKs Trumbull Termination, Allows DuPont Claim ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved Solutia, Inc., and its affiliates' request to terminate Trumbull Group, LLC, as their claims and noticing agent, effective January 3, 2009. The Bankruptcy Clerk will serve as the noticing agent to mail and notices to the estates' creditors and parties-in-interest. In the event Trumbull receives any claims or other documents pertaining to the Reorganized Debtors' Chapter 11 cases, the firm will transfer those claims or documents to the Federal Archives as soon as practicable. The Bankruptcy Court has also approved the stipulation between the Reorganized Debtors and E.I. DuPont de Nemours and Company, which provides, among other things, that DuPont is granted an allowed administrative claim for $600,000. About Solutia Inc. Based in St. Louis, Missouri, Solutia Inc. (NYSE: SOA) -- http://www.solutia.com/-- and its subsidiaries, manufactures and sells chemical-based materials, which are used in consumer and industrial applications worldwide. The company and 15 debtor-affiliates filed for chapter 11 protection on Dec. 17, 2003 (Bankr. S.D.N.Y. Lead Case No. 03- 17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., Jonathan S. Henes, Esq., and Michael A. Cohen, Esq., at Kirkland & Ellis LLP, in New York, as lead bankruptcy counsel, and David A. Warfield, Esq., and Laura Toledo, Esq., at Blackwell Sanders LLP, in St. Louis Missouri, as special counsel. Trumbull Group LLC is the Debtor's claims and noticing agent. Daniel H. Golden, Esq., Ira S. Dizengoff, Esq., and Russel J. Reid, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Official Committee of Unsecured Creditors, and Derron S. Slonecker at Houlihan Lokey Howard & Zukin Capital provides the Creditors' Committee with financial advice. The Official Committee of Retirees of Solutia, Inc., et al., is represented by Daniel D. Doyle, Esq., Nicholas A. Franke, Esq., and David M. Brown, Esq., at Spencer Fane Britt & Browne, LLP, in St. Louis, Missouri, and Frank M. Young, Esq., Thomas E. Reynolds, Esq., R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, in Birmingham, Alabama. On Feb. 14, 2006, the Debtors filed their Reorganization Plan & Disclosure Statement. On May 15, 2007, they filed an Amended Reorganization Plan and on July 9, 2007, filed a 2nd Amended Reorganization Plan. The Bankruptcy Court approved the Debtors' amended Disclosure Statement on Oct. 19, 2007. On Oct. 22, 2007, the Debtor re-filed a Consensual Plan & Disclosure Statement and on Nov. 29, 2007, the Court confirmed the Debtors' Consensual Plan. Solutia emerged from chapter 11 protection Feb. 28, 2008. Solutia's $2.05 billion exit financing facility was funded by Citigroup Global Markets Inc., Goldman Sachs Credit Partners L.P., and Deutsche Bank Securities Inc. The exit financing is being used to pay certain creditors, and for ongoing operations. (Solutia Bankruptcy News, Issue No. 136; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * Standard & Poor's Ratings Services said its ratings on Solutia Inc. (B+/Stable/--) will not change as a result of the company's recent announcement of a public offering of common shares. SOLUTIA INC: Accounts for $440MM of $2.9BB PIPE Deals in 2008 ------------------------------------------------------------- Many companies, amid the present economic condition, have turned to private investment in public equity -- PIPE -- transactions to raise capital, Marie Leone of CFO.com reported. There have been 78 registered direct deals aggregating $2,900,000,000 in gross proceeds, representing roughly 8% of the 969 PIPE transactions completed in 2008 for an aggregate $108,000,000,000, Ms. Leone, citing a report by Sagient Research, which runs the PlacementTracker database, pointed out. Registered direct deals grossed $3,700,000,000 in 2007 and $3,000,000,000 in 2006, she added. "Registered direct deals," a subset of the PIPE, are PIPEs that involve shares already registered with the U.S. Securities and Exchange Commission. Completing the regulatory paperwork early through a shelf registration gives companies two to three years to issue the shares, thereby allowing them to move quickly when the market conditions are right, CFO.com quoted Stuart Bressman, an attorney at Proskauer Rose, who works on PIPEs, as saying. For registered deals, the company's board of directors must approve the issue, in the same way they would approve any secondary offering. But a registered direct offering is presented only to a tiny group of hand-picked investors and brokered bilaterally by an investment bank acting as a placement agent, rather than an underwriter. In August 2008, Solutia Inc. (NYSE:SOA) launched an underwritten public offering of 22,307,692 shares of its common stock at a price of $13 per share for gross proceeds of approximately $290,000,000. All of the approximately $277,000,000 of net proceeds from the offering will be used to partially repay Solutia's $400,000,000 15.50% bridge credit facility, with an initial maturity date of Feb. 28, 2009. In September 2008, Solutia also sold at $14 per share an underwritten public offering of 10,714,284 shares of its common stock, with expected gross proceeds of $150,000,000. CFO.com said, so far, the largest registered direct transactions of 2008: Closing Gross Share Shares Closing Company Date Proceeds Price Issued Discount ------- ------- -------- ----- ------ -------- St. Joe Company 03/03 $600,000,000 $35.00 17,100,000 8.97% Solutia Inc. 11/08 290,000,000 13.00 22,300,000 15.80% Solutia Inc. 08/21 150,000,000 14.00 11,000,000 8.68% Regent Energy 07/25 200,000,000 22.18 9,000,000 7.58% Partners H&R Block 10/22 145,000,000 17.50 8,300,000 2.62% Crosstex Energy 04/09 100,000,000 30.00 3,300,000 8.28% Omega Healthcare 05/01 100,000,000 16.93 6,000,000 3.26% Investors Vivus Inc. 08/06 65,000,000 7.77 8,400,000 16.00% Kinder Morgan 02/12 60,000,000 55.65 1,000,000 3.37% Energy Partners Orient-Express 11/14 55,000,000 6.50 8,500,000 21.97% Hotels PIPE transactions "seem to be a silent, safe haven for issuers unsure whether an offering will attract investors," Ms. Leone stated. About Solutia Inc. Based in St. Louis, Missouri, Solutia Inc. (NYSE: SOA) -- http://www.solutia.com/-- and its subsidiaries, manufactures and sells chemical-based materials, which are used in consumer and industrial applications worldwide. The company and 15 debtor-affiliates filed for chapter 11 protection on Dec. 17, 2003 (Bankr. S.D.N.Y. Lead Case No. 03- 17949). When the Debtors filed for protection from their creditors, they listed $2,854,000,000 in assets and $3,223,000,000 in debts. Solutia is represented by Richard M. Cieri, Esq., Jonathan S. Henes, Esq., and Michael A. Cohen, Esq., at Kirkland & Ellis LLP, in New York, as lead bankruptcy counsel, and David A. Warfield, Esq., and Laura Toledo, Esq., at Blackwell Sanders LLP, in St. Louis Missouri, as special counsel. Trumbull Group LLC is the Debtor's claims and noticing agent. Daniel H. Golden, Esq., Ira S. Dizengoff, Esq., and Russel J. Reid, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Official Committee of Unsecured Creditors, and Derron S. Slonecker at Houlihan Lokey Howard & Zukin Capital provides the Creditors' Committee with financial advice. The Official Committee of Retirees of Solutia, Inc., et al., is represented by Daniel D. Doyle, Esq., Nicholas A. Franke, Esq., and David M. Brown, Esq., at Spencer Fane Britt & Browne, LLP, in St. Louis, Missouri, and Frank M. Young, Esq., Thomas E. Reynolds, Esq., R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, in Birmingham, Alabama. On Feb. 14, 2006, the Debtors filed their Reorganization Plan & Disclosure Statement. On May 15, 2007, they filed an Amended Reorganization Plan and on July 9, 2007, filed a 2nd Amended Reorganization Plan. The Bankruptcy Court approved the Debtors' amended Disclosure Statement on Oct. 19, 2007. On Oct. 22, 2007, the Debtor re-filed a Consensual Plan & Disclosure Statement and on Nov. 29, 2007, the Court confirmed the Debtors' Consensual Plan. Solutia emerged from chapter 11 protection Feb. 28, 2008. Solutia's $2.05 billion exit financing facility was funded by Citigroup Global Markets Inc., Goldman Sachs Credit Partners L.P., and Deutsche Bank Securities Inc. The exit financing is being used to pay certain creditors, and for ongoing operations. (Solutia Bankruptcy News, Issue No. 136; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). * * * Standard & Poor's Ratings Services said its ratings on Solutia Inc. (B+/Stable/--) will not change as a result of the company's recent announcement of a public offering of common shares. SPECTRUM BRANDS: Fitch Affirms & Withdraws Ratings -------------------------------------------------- Fitch Ratings has affirmed and simultaneously withdrawn its ratings on Spectrum Brands, Inc. (Spectrum): -- Issuer default rating (IDR) of 'CCC'; -- Senior Term Loan Facility rated 'B/RR1'; -- Revolving Credit Facility rated 'B/RR1'; -- Senior Subordinated Notes rated 'CCC-/RR5'. The Rating Outlook is Negative. Fitch will no longer provide ratings or analytical coverage of Spectrum. STATION CASINOS: Gaming Industry to Remain Under Pressure in 2009 ----------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) STILLWATER MINING: Moody's Junks CFR; Outlook Remains Positive -------------------------------------------------------------- Moody's Investors Service downgraded the corporate family rating of Stillwater Mining Company to Caa1 from B3. The outlook remains negative. The downgrade primarily reflects the company's ongoing challenges given SWC's high cost structure and the current price environment. SWC has significant exposure to Ford Motor Company (Caa1 - Negative) and General Motors Corporation (Ca - Negative), which are currently experiencing operating difficulties. Somewhat mitigating the latter concern is SWC's significant unrestricted balance sheet cash ($106 million at 09/30/08), lack of near-term maturities, and limited interest payments given the 1.875% coupon on its existing $181.5 million senior unsecured convertible notes, due 2028 (not rated by Moody's). The downgrade to Caa1 considers that the company, in Moody's opinion, has entered a capital preservation mode as evidenced by SWC's announced decision to reduce its capital spending and restructure its current operations, without which, it would have burned in excess of approximately $25 million per quarter. Given the current operational plan, Moody's believes SWC will be challenged to sustain the business over the intermediate term. The rating also reflects deteriorating conditions in the domestic automotive industry and the potential resulting impact on SWC's credit fundamentals and liquidity position. The company derives a substantial cash benefit from the existing contracts. Without these, Moody's believes that SWC's operations would be more uneconomical. The negative outlook reflects that, despite the restructuring plan, Moody's believes that SWC could continue to burn cash which could deplete the currently large cash balance. The ratings could be downgraded if Moody's expected unrestricted cash to fall below $50 million. Ratings affected by the actions include: * Corporate Family Rating lowered to Caa1 from B3 * Probability of default rating lowered to Caa1 from B3 * $30 million 8% State of Montana Revenue Bonds due 2020 affirmed at Caa1 with LGD point estimate changed to LGD 4, 54% from LGD 4, 64% * Outlook Remains Negative The last rating action was on October 8, 2008, when the ratings of Stillwater Mining Company were downgraded to B3 from B2 and a negative outlook was assigned. Stillwater Mining Company is headquartered in Columbus, Montana. The company is the only US producer of palladium and platinum and the only significant producer of platinum group metals outside of South Africa and Russia. Revenues for the twelve month period ending September 30, 2008 were approximately $789 million. STONERIDGE INC: Moody's Puts Low-B Ratings on Review for Downgrade ------------------------------------------------------------------ Moody's Investors Service placed Warren, Ohio based Stoneridge, Inc.'s long term ratings, including its B1 Corporate Family Rating and B2 rating of its $200 million senior unsecured notes ($183 million currently outstanding after repayment), under review for possible downgrade. Concurrently, its Speculative Grade Liquidity rating of SGL-2 was affirmed. The review for possible downgrade reflects Stoneridge's eroding operating performance in part due to the rapid deterioration in the North American production levels especially at the Detroit-3 automobile manufacturers. Moody's expects these negative factors, combined with expected lower production level at the commercial vehicle and heavy truck market (which accounts for approximately 50% of the company's total revenues) and lower production volumes in international markets (approximately 25% of total revenues) would likely persist into 2009 and could result in significant deterioration of Stoneridge's credit metrics going forward. Despite the substantial downward pressure, Moody's expects the company would likely maintain a sound liquidity position during the next twelve months, principally underpinned by its sizeable cash position, and relatively light near-term debt maturity. While recognizing its diversification in end markets and geographic footprints, Stoneridge still has significant exposure to the auto industry with approximately 40% of its total revenues generated from products being supplied OEM's and Tier-1 auto suppliers. Volume reduction has resulted in weakening trends in performance through the year as management recently reduced its 2008 earnings guidance substantially and, for the most recent quarter, the company reported a net loss after many consecutive quarters of net profits. Although Stoneridge has so far been on track in its restructuring effort to reduce operating costs and improve efficiency, the benefits anticipated from these initiatives might not be sufficient to offset the expected further production cuts at automotive OEM's and slow-down in commercial vehicle segment. Moody's review will assess the expected deterioration in Stoneridge's credit metrics over the near term resulting from North American and European production pressures, and the eroded financial condition of the North American operations of the Detroit-3. Moody's will also consider the fact that while Stoneridge has successfully implemented restructuring programs in the past, whether its potential further restructuring initiatives would be enough to help it sustain its current credit metrics in the next 12-18 months. Moody's cautions that Stoneridge has significant operating exposure (20% of its total revenues) to the Detroit-3 auto makers, and potential financial restructurings or bankruptcy filings by one or more of those companies could create further operating disruptions for the company. Moody's expects the next few quarters would be very challenging for auto suppliers in North America in particular those with material exposure to Detroit-3 such as Stoneridge, as the pace of the deterioration could accelerate as OEM's are reducing their production levels substantially from the same level last year at least though the end of first quarter 2009 (in GM's case, by more than 50%). The affirmation of SGL-2 anticipates Stoneridge's liquidity profile is likely to remain good in the next twelve months. Though its future cash flow generation is expected to weaken as a result of the challenging operating environment, its liquidity gains support from its sizeable cash balance standing at $90 million at the end of third quarter 2008, no significant near- term debt maturity, and expected access to its external credit facility with sufficient borrowing base in the coming year. However, the SGL-2 could be under pressure if the free cash flow generation became negative on a sustained basis and resulted in fast erosion in cash balances and/or substantial permanent borrowing under the revolver. The rating actions are: Ratings placed under for possible downgrade: * Corporate Family Rating -- B1 * Probability of Default Rating -- B1 * $200 million ($183 million outstanding) senior unsecured notes due 2012 - B2 Rating affirmed: * Speculative Liquidity Rating -- SGL-2 Moody's last rating action on Stoneridge was on July 17, 2008 when a first time SGL rating was assigned at SGL-2 with no change at long term ratings and outlook. Headquartered in Warren, Ohio, Stoneridge is a designer and manufacturer of highly engineered electrical and electronic components, modules and systems for automotive, medium and heavy- duty truck, agricultural and off-highway vehicle markets. For the twelve months ended September 30, 2008, the company reported revenues of $780 million. SUNSTATE EQUIPMENT: S&P Affirms 'B+' Rating; Outlook Negative ------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Sunstate Equipment Co. LLC to negative from stable. "We also affirmed all ratings on the Phoenix-based company, including the 'B+' corporate credit rating," S&P said. "This action reflects our expectation of weaker conditions in nonresidential equipment markets," said Standard & Poor's credit analyst John R. Sico. "If Sunstate does not reduce capital spending to generate positive free cash flow, we could lower the rating in the next 12 months." TENET HEALTHCARE: Board OKs Amendments and Restatement of Bylaws ---------------------------------------------------------------- The board of directors of Tenet Healthcare Corporation, upon recommendation of the Nominating and Corporate Governance Committee of the board, approved amendments to and a restatement of the company's Restated Bylaws. The Restated Bylaws amend the prior bylaws of the company in these principal respects: a) The Restated Bylaws amend and restate Section 2.10, which applies to shareholders seeking to propose business or nominate directors at a shareholders' meeting, to: -- Consolidate the advance notice requirements contained in Sections 2.10 and 3.4 into Section 2.10. -- Provide that the only business conducted at a special meeting will be business brought before the meeting by the company in its notice of meeting. -- Explicitly provide that Section 2.10 applies to all shareholder proposals of business or nominations and is the exclusive means for a shareholder to submit such business or nominations, other than proposals properly brought under Rule 14a-8 of the federal proxy rules. -- Expand the required disclosure regarding any shareholder making such proposals or nominations and regarding a person proposed to be nominated for election as a director to include, among other things, all ownership interests, hedges, economic incentives, and rights to vote any shares of any security of the company. In addition, the advance notice must disclose any material agreements between such shareholder and any other persons relating to such proposal or nomination and any material interest of such shareholder in such proposal or nomination. Also, certain information provided in the required notice must be updated so that such information is provided (1) as of the date of the notice, (2) no later than five business days after the record date, (3) within two business days of any change in such information and (4) as of the close of business on the day preceding the meeting date. -- Require a person proposed by a shareholder to be nominated for election as a director to (1) deliver a completed questionnaire regarding such person's background and qualifications, (2) disclose any compensatory or other material agreements among the nominating shareholder, its affiliates and associates and the proposed nominee and (3) represent that he or she has no voting agreements and no undisclosed compensation arrangements and will comply upon election with the company's publicly disclosed governance, conflict of interest, confidentiality and stock trading policies. -- Allow a shareholder's notice to be considered timely if, in the event the number of directors to be elected to the board is increased and there is no public announcement of the action at least 100 days prior to the first anniversary of the preceding year's annual meeting, the notice is delivered by the close of business on the 10th day after the announcement. -- Require inclusion, if the advance notice relates to any business other than the nomination of persons for election as directors, of the text of any resolutions proposed to be adopted, the language of any proposed amendments to the Restated Bylaws, and a description of all agreements between the shareholder bringing the proposal and any other person. -- Require that the shareholder making proposals for business or nominations be a shareholder of record of the Company's stock at the time of giving of notice and at the time of the meeting. b) The Restated Bylaws amend and restate Article X, which applies to indemnification of directors and officers, to: -- Provide for mandatory indemnification, to the fullest extent permitted by law, of any present or former director or officer of the company or any of its affiliates or subsidiaries who has served as such a director or officer on or after the effective date of the Restated Bylaws, for all expenses, liabilities, losses or other specified amounts, resulting from a legal proceeding arising from any occurrence that takes place after the adoption of the Restated Bylaws and that relates to the fact that such Indemnitee is or was a director or officer of the company or any of its affiliates or subsidiaries, or at the request of the company, served in one of several specified capacities with respect to another entity. -- Provide that the company is not required to indemnify an Indemnitee in connection with any legal proceeding initiated by the Indemnitee except under certain specified circumstances. -- Require the advancement of expenses to an Indemnitee upon receipt of an undertaking by the Indemnitee to repay if it is ultimately determined that the Indemnitee is not entitled to be indemnified by the company. -- Provide that (1) when making a determination of whether an Indemnitee is entitled to indemnification under the Restated Bylaws, there is a presumption that the Indemnitee is entitled to indemnification and the company has the burden of proof to overcome that presumption and (2) that, in an Indemnitee's lawsuit to enforce its right to indemnification under the Restated Bylaws, the company must prove with clear and convincing evidence that the Indemnitee is not entitled to indemnification. -- Require the company to indemnify an Indemnitee for expenses that are incurred by an Indemnitee in a lawsuit to enforce the Indeminitee's indemnification rights under the Restated Bylaws. -- Provide that rights to indemnification under the Restated Bylaws are non-exclusive, have certain survival rights and are deemed to be contractual rights. -- Provide that the company has the power to purchase insurance or make other financial arrangements on behalf of an Indemnitee for any liability and any related expenses, except that no such financial arrangement may provide protection for a person adjudged by a court of competent jurisdiction to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to indemnification or advancement of expenses ordered by a court. The amendments to the advance notice requirements are intended to clarify the intent of the provisions in light of developments in corporate law and to enhance the board's ability to analyze shareholder proposals. The amendments to the indemnification provisions are intended to enhance the company's ability to recruit and retain directors and officers. The prior bylaws provided that indemnification of directors and officers was permissive. A full-text copy of the Restated Bylaws is available for free at http://ResearchArchives.com/t/s?3658 About Tenet Healthcare Corporation Headquartered in Dallas, Texas, Tenet Healthcare Corporation -- http://www.tenethealth.com/-- through its subsidiaries, owns and operates acute care hospitals and related ancillary health care businesses, which include ambulatory surgery centers and diagnostic imaging centers. At Sept. 30, 2008, the company's balance sheet showed total assets of $8.2 billion, total liabilities of $8.1 billion and shareholders' equity about $136 million. Tenet Healthcare Corporation (NYSE:THC) today reported net income of $104 million for its third quarter of 2008, compared to a net loss of $59 million for its third quarter of 2007. For nine months ended Sept. 30, 2008, the company reported net income of $58 million compared to net loss of $14 million for the same period in the previous year. * * * Moody's Investors Service placed Tenet Healthcare Corporation's senior unsecured debt rating at 'Caa1' in September 2006. The rating still holds to date with a stable outlook. TENET HEALTHCARE: CEO, Other Execs Disclose Ownership of Stock -------------------------------------------------------------- Stephen L. Newman, chief operating officer of Tenet Healthcare Corp. disclosed in a Form 4 filing with the Securities and Exchange Commission that he acquired 30,000 shares of the company's common stock on Nov. 5, 2008, at prices of $2.49 to $2.50 a share. After these transactions, Mr. Newman may be deemed to directly own 179,781 shares. He also disclosed indirectly owning 750 shares of the company's common stock. Mr. Newman added that he also owns other securities of the company. Trevor Fetter, the company's CEO & president, disclosed in a separate filing that he acquired 100,000 shares of the company's common stock on Nov. 5, 2008: Securities Acquired Price per Share ------------------- --------------- 2,100 $2.64 17,779 $2.65 12,621 $2.66 7,800 $2.67 26,000 $2.68 2,100 $2.69 22,739 $2.7 8,861 $2.71 After the transactions, Mr. Fetter may be deemed to 911,321 shares. Mr. Fetter also stated that he also indirectly owns 10,200 shares of the company's common stock. Biggs C. Porter, CFO, disclosed that he acquired 10,000 shares of the company's common stock at $2.04 per share on Nov. 10, 2008. After the transaction, Mr. Porter may be deemed to indirectly own 25,0000 shares. He also said that he may be deemed to directly own 163,826 shares of common stock. Mr. Porter disclosed directly owning other securities. Other Officers Richard Pettingill, the company's director, also disclosed acquiring 10,000 shares of common stock at $2.64 per share on Nov. 6, 2008. He also added that he owns other securities of the company. Cathy Fraser senior vice president of the company disclosed in a separate filings that she may be deemed to directly own 26,059 shares of the company's common stock after the Nov. 6, 2008, purchase of 10,000 shares at $2.6 per share. Ms. Fraser also disclosed directly owning other securities of the company. In a separate filing, Gary K. Ruff, SVP and general counsel of the company, disclosed that he acquired 10,000 shares of the company's common stock on Nov. 5, 2008 at prices of $2.54 to $2.55 a share. After the acquisitions, Mr. Ruff may be deemed to directly own 27,040 shares. Mr. Ruff added that he also own other securities of the company. About Tenet Healthcare Corporation Headquartered in Dallas, Texas, Tenet Healthcare Corporation -- http://www.tenethealth.com/-- through its subsidiaries, owns and operates acute care hospitals and related ancillary health care businesses, which include ambulatory surgery centers and diagnostic imaging centers. At Sept. 30, 2008, the company's balance sheet showed total assets of $8.2 billion, total liabilities of $8.1 billion and shareholders' equity about $136 million. Tenet Healthcare Corporation reported net income of $104 million for its third quarter of 2008, compared to a net loss of $59 million for its third quarter of 2007. For nine months ended Sept. 30, 2008, the company reported net income of $58 million compared to net loss of $14 million for the same period in the previous year. * * * Moody's Investors Service placed Tenet Healthcare Corporation's senior unsecured debt rating at 'Caa1' in September 2006. The rating still holds to date with a stable outlook. THE GAP: Fitch Affirms & Withdraws Low-B Ratings ------------------------------------------------ Fitch Ratings has affirmed and simultaneously withdrawn its ratings on The Gap, Inc. (Gap): -- Issuer default rating (IDR) of 'BB+'; -- Revolving Credit Facility rated 'BB+'; -- Senior Unsecured Note rated 'BB+'. The Rating Outlook is Stable. Fitch will no longer provide ratings or analytical coverage of Gap. THORNBURG MORTGAGE: S&P Lifts Counterparty Credit Rating to 'CC' ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its counterparty credit rating on Thornburg Mortgage Inc. to 'CC' from 'D'. "At the same time, we also raised our rating on Thornburg's senior notes to 'CC' from 'D'. The outlook is negative," S&P said. "This rating change follows Thornburg's announcement that, as of Dec. 12, 2008, it had paid the missed interest payment on its 8% senior notes that was due on Nov. 15, 2008. Since that due date, the company has successfully tendered its preferred shares, allowing for a reduction of funding costs on its senior subordinated notes to 12% from 18%." "Thornburg has also completed negotiations with its override agreement counterparties by agreeing to pay them $110 million from the company's liquidity reserve fund. This amended agreement frees Thornburg from any additional margin calls from its counterparties, which should help the company's liquidity for the time being," said Standard & Poor's credit analyst Adom Rosengarten. "Nevertheless, the company continues to face challenges going forward. "Despite the reduced coupon on its senior subordinated notes, Thornburg's funding costs remain extremely high. Funding markets remain strained, and future funding could be difficult to secure. This is could become especially significant as the override agreement's expiration date draws near, and Thornburg must either pay down the remaining repo funding, extend its agreement, or find alternate sources of funding," Mr. Rosengarten added. TREMONT GROUP: More Than Half of Assets Invested in Madoff's Firm ----------------------------------------------------------------- Tremont Group Holdings Inc. had US$3.3 billion, or more than half its total assets, invested with Bernard Madoff, Katherine Burton of Bloomberg News reports citing a person familiar with the matter. The person told Bloomberg News Tremont's Rye Investment Management unit had US$3.1 billion, virtually all the money the group managed, allocated to Madoff. Tremont also had another US$200 million, or about 7% of its total assets, invested through its fund of funds group, Tremont Capital Management, the person was cited by Bloomberg News as saying. According to Bloomberg News, Mr. Madoff was arrested Dec. 11 and charged with defrauding investors of as much as US$50 billion through a Ponzi scheme at his New York-based firm's business advising rich people, hedge funds and institutions. "We believe Tremont exercised appropriate due diligence in connection with the Madoff investments," Tremont said in a statement obtained by Bloomberg News. New York-based Tremont Group Holdings Inc. -- http://www.tremont.com/-- is the holding company for Tremont Capital Management (formerly Tremont Advisers), a fund of hedge funds. Tremont Group manages roughly US$6 billion in assets through its fund of hedge fund products and multi-manager portfolios, as well as its single-manager Rye Investment Management unit. The Tremont Group has offices in Toronto; London; and Hong Kong. OppenheimerFunds, which is majority controlled by MassMutual, owns the Tremont Group. TRIBUNE CO: Teamsters Says Employees Should Be First in Line ------------------------------------------------------------ Teamsters general president James P. Hoffa said in a statement that billionaire Sam Zell's decision to take Tribune Co. private in an overleveraged, doomed deal that swiftly brought down the 161-year-old media giant, placed risks squarely on the shoulders of Tribune workers. Mr. Hoffa said, as Tribune's creditors head to bankruptcy court for payback, these workers should go directly to the front of the line. By transferring 100 percent ownership of the company and some $13 billion of debt to an S-Corp Employee Stock Ownership Plan in the buyout, Mr. Zell insulated himself from tax responsibilities and mortgaged the future retirement savings of Tribune employees, Mr. Hoffa related. Despite owning 100% of the company, employees were given no voice in the governance of the company or in the plan itself. They've had no say in the terms of their own debt obligations or decisions related to how best to service that debt, Mr. Hoffa noted. Tribune contributions to employee retirement savings for employee-owners, Mr. Hoffa said, changed from a defined benefit plan to a defined contribution plan structured as the ESOP. Employees participating in the ESOP can't diversify their holdings until they reach age 55, he continued. According to the statement, the first of the company's contributions to the ESOP was expected to happen in the first quarter, but now -- with the Tribune mired in Chapter 11 bankruptcy -- it's unclear whether that will happen or whether those shares will have any value. Not everyone lost on the deal. Tribune executives made millions, including chief executive officer, Dennis FitzSimons, who engineered the deal with Mr. Zell and raked in $17.7 million in severance and other payments and cashed in his stock for $23.8 million, Mr. Hoffa said. Shareholders traded in stock rated deep into junk territory for cash representing a 21 percent premium over the stock price just before the transaction, he added. The banks that lent Tribune the money, Mr. Hoffa said, shared some $47 million in fees. Citigroup and Merrill Lynch who advised Tribune on the deal received $35.8 million and $37 million respectively. And billionaire Mr. Zell, who put up only $315 million in the deal, is expected to stand ahead of employees in the creditors' line at bankruptcy court. Mr. Hoff said, "One thing is for sure -- the Teamsters will remain vigilant during the bankruptcy process to ensure that our members and all Tribune employee interests are advanced." About Tribune Company Headquartered in Chicago, Illinois, Tribune Company -- http://www.tribune.com/-- is a media company, operating businesses in publishing, interactive and broadcasting, including ten daily newspapers and commuter tabloids, 23 television stations, WGN America, WGN-AM and the Chicago Cubs baseball team. The company and 110 of its affiliates filed for Chapter 11 protection on December 8, 2008 (Bankr. D. Del. Lead Case No. 08-13141). The Debtors proposed Sidley Austion LLP as their counsel; Cole, Schotz, Meisel, Forman & Leonard, PA, as Delaware counsel; Lazard Ltd. and Alvarez & Marsal North Americal LLC as financial advisors; and Epiq Bankruptcy Solutions LLC as claims agent. As of Dec. 8, 2008, the Debtors have $7,604,195,000 in total assets and $12,972,541,148 in total debts. TRIMAS CORP: Moody's Affirms B2 CFR & Junks Sr. Sub. Notes Rating ----------------------------------------------------------------- Moody's Investors Service affirmed TriMas Corporation's corporate family and probability of default ratings at B2. In related rating actions Moody's downgraded the rating for the company's senior secured bank credit facility to Ba3 from Ba2 and the rating for the senior subordinated notes due 2012 to Caa1 from B3. TriMas' speculative grade liquidity remains at SGL-3. The outlook is stable. TriMas' B2 corporate family rating reflects the company's diverse product offerings and customer diversification, strong market position within each line of business, and healthy margins and return metrics. For some of the financial metrics within Moody's Global Manufacturing Rating Methodology TriMas' performance could be seen as to be consistent with a rating higher than the B2 assigned. Through LTM September 30, 2008, key return metrics were: EBITA margin - 9.1%, EBITA/average assets - 7.2%, and free cash flow/debt -- 5.8% (all ratios adjusted per Moody's methodology). Yet, these strengths are balanced against its North American concentration where the company must contend with the sluggish U.S. economy. Further constraining the rating is the company's exposure to the recreational vehicle (RV) and recreational end markets, which continue to deteriorate, and are a drag on the company's overall performance. TriMas should be able to weather these challenges within the B2 rating level due to the company's ability to generate free cash flow and the strength of its Energy Products and Industrial Products businesses, which are helping to mitigate the declining performance in the RV Trailer and Recreational Accessories segments. The ratings for the senior secured bank credit facility and senior subordinated notes reflect the probability of default of the company, to which Moody's assigns a PDR of B2. The downgrades to the secured credit facility and senior subordinated notes due 2012 result from the revised expectations regarding the loss given default assessments for these debt instruments. The inclusion of the non-U.S. bank debt in the LGD waterfall creates a capital structure reflecting the potential claims on TriMas in a recovery scenario. This debt at the company's foreign operating subsidiaries acts to increase the loss given default assessment of the bank credit facility and senior subordinated notes due 2012, providing pressure to the ratings. These ratings and assessments were affected by this action: * Corporate family rating affirmed at B2; * Probability of default affirmed at B2; * $407.7 million (originally $410.0 million) senior secured bank credit facility downgraded to Ba3 (LGD2, 23%) from Ba2 (LGD2, 22%); and * $337 million (originally $437.8 million) senior subordinated notes due 2012 downgraded to Caa1 (LGD5, 77%) from B3 (LGD5, 76%) The company's speculative grade liquidity rating of SGL-3 is unchanged. The last rating action was on June 26, 2006 at which time Moody's affirmed TriMas' B2 corporate family rating. TriMas Corporation is a multi-industrial manufacturer. The Company is engaged in five business segments with diverse products and market channels. Last twelve months revenues through September 30, 2008 were approximately $1.1 billion. TRONOX INC: Taps Kirkland & Ellis for Bankruptcy Advice ------------------------------------------------------- Bloomberg News' By Tiffany Kary reports that Tronox Inc. has hired Kirkland & Ellis in Chicago, Illinois, to explore a bankruptcy filing, a person familiar with the situation said. The source told Bloomberg that Kirkland was asked to evaluate a possible filing. Robert Gibney, a Tronox spokesman, didn't immediately return a phone call and e-mail seeking comment, Bloomberg says. Tronox Worldwide LLC, a wholly owned subsidiary of Tronox Incorporated, did not make a scheduled payment of interest when due on December 1, 2008 on its $350,000,000 of 9-1/2% Senior Notes due 2012 issued pursuant to an Indenture, dated as of November 28, 2005, among Tronox Worldwide LLC, Tronox Finance Corp., and Citibank, N.A, as trustee. Failure to make the interest payment within 30 days of December 1, 2008 would constitute an event of default under the indenture governing the notes, permitting holders of at least 25% in principal amount of the notes to declare the full amount of the notes immediately due and payable. On December 4, 2008, Tronox Inc. and Tronox Worldwide entered into a Second Waiver Extension with certain lenders under Tronox Worldwide's Credit Agreement, dated as of November 28, 2005, as amended, with the lenders, Lehman Brothers Inc. and Credit Suisse, as joint lead arrangers and joint bookrunners, ABN Amro Bank N.V., as syndication agent, JPMorgan Chase Bank, N.A. and Citicorp USA, Inc., as co-documentation agents, and Lehman Commercial Paper Inc., as administrative agent. The parties previously entered into a Waiver and Amendment to Credit Agreement dated October 28, 2008, and the Waiver Extension to the Credit Agreement, dated as of November 20, 2008. Lenders holding a majority of the aggregate principal amount of loans under the Credit Agreement have agreed to waive certain defaults and events of default that may have occurred due to Tronox Worldwide's (i) failure to comply for the period of four consecutive fiscal quarters ending September 30, 2008 with Section 7.1(a) of the Credit Agreement, which requires maintenance of a maximum Consolidated Total Leverage Ratio, and Section 7.1(b) of the Credit Agreement, which requires maintenance of a minimum Consolidated Interest Coverage Ratio, and (ii) submission of the Borrowing Notice on September 30, 2008, or receipt of any proceeds in respect thereof, at a time when any default or event of default had occurred and was continuing. The Second Waiver Extension amended the term "Waiver Period" to extend that period from December 5, 2008, to December 19, 2008. As a result, the Waiver has been extended to expire upon the earlier to occur of (i) December 19, 2008 and (ii) the occurrence of any event of default (other than any default waived pursuant to the Waiver and Amendment) and delivery by any of the lenders of a notice to Tronox Worldwide, while such event of default is continuing, stating that the Waiver is being terminated. There is no assurance that the company will not be in default under the Credit Agreement in the future. If the company were to be in default under the Credit Agreement, its ability to borrow under the Credit Agreement would be impaired and the lenders could declare a default which could ultimately cause all amounts due under the Credit Agreement to become immediately due and payable. On December 5, 2008, Tronox Funding LLC and Tronox Worldwide entered into the Fifth Amendment to Receivables Sale Agreement to the Receivables Sale Agreement with The Royal Bank of Scotland plc and Amsterdam Funding Corporation, dated as of September 26, 2007. Amendment No. 5 amended the term "Scheduled Termination Date" in the Sale Agreement to extend that date from December 5, 2008 to December 19, 2008. There is no assurance that the Seller and Tronox Worldwide will be able to obtain additional amendments or waivers to the Sale Agreement, or that a Termination Event will not occur under the Sale Agreement in the future. The occurrence of a Termination Event in the future would adversely affect the rights of the Seller under the Sale Agreement. A full-text copy of the Second Waiver Extension, dated December 4, 2008, is available at no charge at: http://ResearchArchives.com/t/s?3661 A full-text copy of the Fifth Amendment to Receivables Sale Agreement, dated December 5, 2008, is available at no charge at: http://ResearchArchives.com/t/s?3662 About Tronox Headquartered in Oklahoma City, Tronox Incorporated (NYSE:TRX) -- http://www.tronox.com/-- is a producer and marketer of titanium dioxide pigment, an inorganic white pigment used in paint, coatings, plastics, paper and many other everyday products. The company's five pigment plants, which are located in the United States, Australia, Germany and the Netherlands, supply performance products to approximately 1,100 customers in 100 countries. In addition, Tronox produces electrolytic products, including sodium chlorate, electrolytic manganese dioxide, boron trichloride, elemental boron and lithium manganese oxide. Bloomberg says the company is the world's third largest maker of titanium dioxide. According to Bloomberg, DuPont Co. is the largest maker of the chemical, followed by Saudi-owned National Titanium Dioxide Co., known a Cristal. Tronox has $1.6 billion in total assets, including $646.9 million in current assets, as at September 30, 2008. The company has $881.6 million in current debts and $355.9 million in total noncurrent debts. Tronox has retained the investment banking firm Rothschild Inc. to further assist the company in evaluating strategic options for the business. As of December 4, Robert Y. Brown, III, Tronox Incorporated vice president of strategic planning and business services was no longer with the company. TRUMP ENTERTAINMENT: Industry to Remain Under Pressure in 2009 -------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) VICORP RESTAURANTS: To Sell Most of Assets for $59 Million ---------------------------------------------------------- Vicorp. Restaurants Inc., asks the U.S. Bankruptcy Court for the District of Delaware to approve at the Dec. 22 hearing procedures for the sale of substantially all its assets to Fidelity National Special Opportunities Inc. and Newport Global Advisors, or to another party at an auction. Fidelity and Newport, who are both unsecured bondholders of the Debtors, will form an entity to purchase the assets. According to Bloomberg's Bill Rochelle, in accordance with its agreement with its DIP lenders, Vicorp has signed a letter of intent with Fidelity/Newport to sell most of its assets for $59 million in cash. The sale will be subject to higher and better offers at an auction. Vicorp contemplates this schedule: -- deadline for competing bids will be January 9. -- an auction will be held Jan. 13 if multiple bids are received by the bid deadline. -- Vicorp will present the results of the auction at the Jan. 16 sale hearing. The Cash Portion of the Purchase Price will include a $20 million equity contribution. According to Mr. Rochelle, the purchase price offered by Fidelity/Newport is to cover senior secured debt, the cost of curing lease arrears, administrative costs and professional fees. In addition, Vicorp's creditors will receive warrants to buy 10% of the common stock in the new company. Bloomberg adds that the assets being purchased include lawsuits belonging to Vicorp. The Debtors relate that pursuant to the Revised Second Amendment DIP Order, dated Oct. 10, 2008, the Debtors are required to sell substantially all of their assets on or before Jan. 31, 2009. The Debtors intend to file with the Court an executed copy of the Stalking Horse Agreement with the Purchaser no later than Dec. 17, 2008. Pursuant to the Letter of Intent, Fidelity/Newport will not purchase (i) the California locations and the equipment, (ii) the Hopkins location and the equipment and (iii) the Toughy and Western location and the equipment. If Fidelity/Newport is not designated as the Successful Bidder at the conclusion of the Auction, the Debtors request authority to pay Fidelity/Newport from the sale proceeds as a superpriority administrative expense claim pursuant to Section 503(b) of the Bankruptcy Code a Break-Up fee in the amount equal to 3% of the Cash Portion of the Purchase Price, a maximum of $1,770,000, based upon the cash bid of $59,000,000, and an expense reimbursement not to exceed $750,000. The Break-Up Fee and Expense Reimbursement shall be paid in cash irrespective of the form of consideration received by the Debtors. Headquartered in Denver, Colorado, VICORP Restaurants, Inc. and VI Acquisition Corp. -- http://www.vicorpinc.com/-- operate family- dining restaurants under the Village Inn and Bakers Square brands. The Debtors also operate 3 pie production facilities that produce pies that are offered in the Debtors' restaurants and are sold to select third-party customers including supermarkets and other restaurant chains. The Debtors filed separate petitions for Chapter 11 relief on April 3, 2008 (Bankr. D. Del. Lead Case No. 08-10623). Kimberly Ellen Connolly Lawson, Esq., Kurt F. Gwynne, Esq., and Richard A. Robinson, Esq., at Reed Smith LLP, Ann C. Cordo, Esq., and Donna L. Culver, Esq., at Morris Nichols Arsht & Tunnell, and Joseph E. Cotterman, Esq., at Gallagher & Kennedy, P.A., represent the Debtors as counsel. The Debtors selected The Garden City Group, Inc. as their claims agent. Abhilash M. Raval, Esq., Dennis Dunne, Esq., and Samuel Khalil, Esq., at Milbank Tweed Hadley & McCloy LLP, Domenic E. Pacitti, Esq., and Michael W. Yurkewicz, Esq., at Klehr Harrison Harvey Branzburg & Ellers, represent the Official Committee of Unsecured Creditors of the Debtors. When the Debtors filed for protection from their creditors, they listed estimated assets of $100 million to $500 million and debts of $100 million to $500 million. VICORP RESTAURANTS: To File Stalking Horse Agreement on Dec. 17 --------------------------------------------------------------- As reported in the Troubled Company Reporter on Dec. 17, 2008, Vicorp. Restaurants Inc. and VI Acquisition Corp. asked the U.S. Bankruptcy Court for the District of Delaware to approve the procedures for the sale of substantially all its assets to Fidelity National Special Opportunities Inc. and Newport Global Advisors, or to another party at an auction. Fidelity and Newport, who are both unsecured bondholders of the Debtors, will form an entity to purchase the assets. The Debtors tell the Court that they intend to file an executed copy of the Stalking Horse Agreement with the Purchaser no later than Dec. 17, 2008. The entity to be formed by Fidelity and Newport will act as the "stalking horse" bidder. As part of the Bid Procedures Order, the Debtors are also requesting approval of the execution of the Stalking Horse Agreement, which includes payment of a Break-Up Fee in the amount equal to 3% of the Cash Portion of the Purchase Price (a maximum of $1,770,000) and the Expense Reimbursement not to exceed $750,000, to the extent payable pursuant to the Stalking Horse Agreement. Headquartered in Denver, Colorado, VICORP Restaurants, Inc. and VI Acquisition Corp. -- http://www.vicorpinc.com/-- operate family- dining restaurants under the Village Inn and Bakers Square brands. The Debtors also operate 3 pie production facilities that produce pies that are offered in the Debtors' restaurants and are sold to select third-party customers including supermarkets and other restaurant chains. The Debtors filed separate petitions for Chapter 11 relief on April 3, 2008 (Bankr. D. Del. Lead Case No. 08-10623). Kimberly Ellen Connolly Lawson, Esq., Kurt F. Gwynne, Esq., and Richard A. Robinson, Esq., at Reed Smith LLP, Ann C. Cordo, Esq., and Donna L. Culver, Esq., at Morris Nichols Arsht & Tunnell, and Joseph E. Cotterman, Esq., at Gallagher & Kennedy, P.A., represent the Debtors as counsel. The Debtors selected The Garden City Group, Inc. as their claims agent. Abhilash M. Raval, Esq., Dennis Dunne, Esq., and Samuel Khalil, Esq., at Milbank Tweed Hadley & McCloy LLP, Domenic E. Pacitti, Esq., and Michael W. Yurkewicz, Esq., at Klehr Harrison Harvey Branzburg & Ellers, represent the Official Committee of Unsecured Creditors of the Debtors. When the Debtors filed for protection from their creditors, they listed estimated assets of $100 million to $500 million and debts of $100 million to $500 million. WACHOVIA BANK: S&P Lowers Ratings on Classes N & O Certificates --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on two classes of commercial mortgage pass-through certificates from Wachovia Bank Commercial Mortgage Trust's series 2003-C9. "Concurrently, we affirmed our ratings on 15 other classes from this transaction," S&P said. "The downgrades reflect expected credit support erosion upon the eventual resolution of a real estate owned (REO) asset in special servicing and the actual realized loss incurred upon the payoff of a $3.7 million loan, formally with the special servicer. The downgrades also reflect our concerns with five ($22.6 million, 3%) of the 11 loans ($34.7 million, 4%) that have reported debt service coverage (DSC) of less than 1.0x. The affirmed ratings reflect credit enhancement levels that provide adequate support through various stress scenarios. "Details of the REO asset and the loan previously with the special servicer, CW Capital, are: -- The Coastal Carolina Campus loan ($12.6 million exposure; 1.4%) is secured by a 120-unit, 432-bed student housing complex built in 2002 in Myrtle Beach, S.C. The loan was transferred to special servicing on Jan. 24, 2005, due to a monetary default, and the property became REO on Nov. 7, 2005. The property was marketed for sale, and a contract has recently been executed. -- The Aztec MHP/RV Park loan was secured by a 328-pad manufactured housing/recreational vehicle park in Mesa, Ariz. The loan matured on Dec. 1, 2008, and was transferred to special servicing at that time. On Dec. 10, 2008, this $3.7 million loan paid off at a discount, and the trust incurred a loss of approximately $77,000, which was incorporated into our rating actions. "The 11 loans with DSC of less than 1.0x are secured by a variety of multifamily, manufactured housing, retail, and office properties, have an average balance of $3.2 million, and have experienced an average decline in DSC of 40% since issuance. Six of these loans were not credit concerns because of improved occupancies, improved leasing conditions, relatively low leverage, or a combination of the above. The five loans that are credit concerns are secured by multifamily, manufacturing housing, office, and retail properties. These properties have experienced a combination of declining occupancies, deteriorating market conditions, and higher operating expenses. These five loans have experienced an average decline of 40% since issuance. "As of the Nov. 17, 2008, remittance report, the collateral pool consisted of 94 loans with an aggregate balance of $903.3 million, compared with 118 loans with a balance of $1.149 billion at issuance. The master servicer, Wachovia Bank N.A. (Wachovia), reported financial information for 95% of the pool. Eighty-six percent of the servicer-provided information was full-year 2007 data. Excluding 11 defeased loans (13%), Standard & Poor's calculated a weighted average DSC of 1.76x for the pool, compared with 1.63x at issuance. There are no delinquent loans; however, the trust has experienced losses from two loans totaling $3.2 million. "The top 10 loan exposures secured by real estate have an aggregate outstanding balance of $412.7 million (46%) and a weighted average DSC of 2.03x, up from 1.84x at issuance. Standard & Poor's reviewed property inspections provided by the master servicer for all of the assets underlying the top 10 exposures. Nine of the properties were characterized as "good," and one was deemed to be in normal condition for the property's age and market. "The credit characteristics of the TSA Office Building, West Oaks Mall, Park City Center, Meadows Mall, and Columbia Corporate Center loans are consistent with those of investment-grade rated obligations. Details of these loans are: -- The TSA Office Building loan has a balance of $95 million (11%) and is the largest loan in the pool. The loan is secured by two Class A office buildings containing 491,126 sq. ft. in Pentagon City, Va. For the year ended Dec. 31, 2007, DSC for this loan was 2.80x, and the occupancy is currently 100%. Standard & Poor's adjusted value for this loan is down 3% since issuance. -- The West Oaks Mall loan has a balance of $70.4 million (8%) and is the second-largest loan in the pool. The loan is secured by 429,318 sq. ft. of space at a regional mall in Ocoee, Fla., consisting of 306,460 sq. ft. of in-line space and 122,858 sq. ft. of outparcel space. For the year ended Dec. 31, 2007, DSC for this loan was 1.98x, and the occupancy was 97.4%. Standard & Poor's adjusted value for this loan is flat since issuance. -- The Park City Center loan, the third-largest loan in the pool, has a trust balance of $60.5 million (7%) and a whole loan balance of $150.4 million. The whole loan consists of two $60.5 million pari passu pieces, one contributed to the subject transaction and the other contributed to the WBCMT 2003-C8 transaction, and a $29.4 million subordinate B note held outside of the trust. The loan is secured by 982,548 sq. ft. of a 1.4-million-sq.-ft. enclosed regional mall in Lancaster, Pa. For the year ended Dec. 31, 2007, DSC for this loan was 2.15x, and the occupancy was 98.2%. Standard & Poor's adjusted value for this loan is flat since issuance. -- The Meadows Mall loan, the fourth-largest loan in the pool, has a trust balance of $51.8 million (6%) and a whole loan balance of $103.5 million. The whole loan consists of two $60.5 million pari passu pieces, one contributed to the subject transaction and the other contributed to the COMM 2004-LB2A transaction. The loan is secured by 307,737 sq. ft. of in-line space that is part of a 956,392-sq.-ft. regional mall located in Las Vegas. For the year ended Dec. 31, 2007, DSC for this loan was 2.21x, and occupancy was 96.0% as of June 30, 2008. Standard & Poor's adjusted value for this loan is up 27% from issuance. -- The Columbia Corporate Center loan has a trust balance of $8.6 million and a whole loan balance of $17.6 million. The whole loan consists of an $8.6 million A note that was contributed to the subject transaction and a $9 million subordinate B note held outside of the trust. The loan is secured by a 146,023- sq.-ft. office building in Florham Park, N.J. For the year ended Dec. 31, 2007, DSC for this loan was 2.46x, and the property was 100% occupied as of July 22, 2008. Standard & Poor's adjusted value for this loan is down 23% from issuance. "Wachovia reported a watch list of 12 loans with an aggregate outstanding balance of $42.0 million (4.6%). These loans were placed on the watchlist due to declining DSC and upcoming lease expirations. "Standard & Poor's stressed the loans on the watchlist along with other loans with credit issues as part of its pool analysis. The resultant credit enhancement levels support the lowered and affirmed ratings." RATINGS LOWERED Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2003-C9 Rating Class To From Credit enhancement (%) ----- -- ---- ---------------------- N B- B 2.19 O CCC+ B- 1.87 RATINGS AFFIRMED Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2003-C9 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-3 AAA 21.59 A-4 AAA 21.59 B AAA 17.77 C AA+ 15.87 D AA- 12.21 E A+ 10.62 F BBB+ 8.87 G BBB 7.12 H BBB- 5.37 J BB+ 4.42 K BB 3.78 L BB- 3.30 M B+ 2.83 X-P AAA N/A X-C AAA N/A N/A--Not applicable. WELLS FARGO: Moody's Downgrades Jumbo Deals Issued in 2006 & 2007 ----------------------------------------------------------------- Moody's Investors Service has downgraded 574 tranches and confirmed 14 tranches from 26 Jumbo transactions issued by Wells Fargo Mortgage Backed Securities Trust in 2006 and 2007. The collateral backing these transactions consists primarily of first-lien, fixed-rate prime Jumbo mortgage loans. The actions are triggered by higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to currently available credit enhancement levels. The actions listed reflect Moody's revised expected losses on the Jumbo sector announced in a press release on September 18, and are part of Moody's on-going review process. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the Aaa waterfalls. General loss estimation methodology is outlined. Complete rating actions are: -- Issuer: Wells Fargo Mortgage Backed Securities 2006-2 Trust Cl. I-A-1 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-2 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-3 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-4 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-5 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-6 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-7 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-8 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-9 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-10 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-11 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-12 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-13 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-14 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-16 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-17 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-3 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-4 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-5 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-6 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-7 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. III-A-1 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. III-A-2 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. IV-A-1 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. IV-A-2 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-3 Trust Cl. A-1 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-12 Certificate, Downgraded to Baa3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-4 Trust Cl. I-A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-2 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-3 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-4 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-5 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-6 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-8 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-9 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-10 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-11 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-12 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-13 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-14 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-PO Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-3 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. II-A-PO Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-6 Trust Cl. I-A-1 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-3 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-5 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-7 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-8 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-9 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-10 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-11 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-12 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-13 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-14 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-15 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-16 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-17 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-18 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-19 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-20 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-21 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-22 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-3 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-7 Trust Cl. I-A-1 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-PO Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. III-A-1 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-8 Trust Cl. A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-12 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-15 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-18 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-19 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-9 Trust Cl. I-A-1 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-4 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-5 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-7 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-8 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-9 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-10 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-11 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-12 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-13 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-14 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-15 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-16 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-17 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-18 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-19 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-20 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-21 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-22 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-24 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-25 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-26 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-27 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-28 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-29 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-30 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-31 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-32 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-33 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-34 Certificate, Downgraded to A2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-35 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. B-1 Certificate, Downgraded to Ba2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-10 Trust Cl. A-1 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Aa3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Aa3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-4 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-12 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to Aa3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-15 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-18 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-19 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-20 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-21 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-22 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-23 Certificate, Downgraded to Aa3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-24 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-25 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-11 Trust Cl. A-1 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-12 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to Ba1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-18 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-19 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-20 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-12 Trust Cl. A-1 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-12 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-15 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to A3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-13 Trust Cl. A-2 Certificate, Downgraded to Aa2, previously on 10/9/06 Assigned to Aa1 Cl. A-6 Certificate, Downgraded to Aa2, previously on 10/9/06 Assigned to Aa1 Cl. A-9 Certificate, Downgraded to Aa2, previously on 10/9/06 Assigned to Aa1 Cl. A-12 Certificate, Downgraded to Aa2, previously on 10/9/06 Assigned to Aa1 Cl. A-PO Certificate, Downgraded to Aa1, previously on 10/9/06 Assigned to Aaa -- Issuer: Wells Fargo Mortgage Backed Securities 2006-14 Trust Cl. A-1 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-15 Trust Cl. A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2006-16 Trust Cl. A-1 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-2 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-4 Certificate, Downgraded to Aa3, previously on 11/8/06 Assigned to Aa1 Cl. A-5 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-6 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-7 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-8 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-9 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-10 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-11 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-12 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-13 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-14 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-15 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-16 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-17 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-18 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-19 Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa Cl. A-PO Certificate, Downgraded to Aa2, previously on 11/8/06 Assigned to Aaa -- Issuer: Wells Fargo Mortgage Backed Securities 2006-17 Trust Cl. A-1 Certificate, Downgraded to A1, previously on 11/7/06 Assigned to Aaa Cl. A-2 Certificate, Downgraded to Aa3, previously on 11/7/06 Assigned to Aaa Cl. A-3 Certificate, Downgraded to A1, previously on 11/7/06 Assigned to Aaa Cl. A-4 Certificate, Downgraded to A1, previously on 11/7/06 Assigned to Aaa Cl. A-PO Certificate, Downgraded to A1, previously on 11/7/06 Assigned to Aaa -- Issuer: Wells Fargo Mortgage Backed Securities 2006-18 Trust Cl. A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-1 Trust Cl. A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Baa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-2 Trust Cl. I-A-1 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-2 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-3 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-4 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-5 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-6 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-7 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-8 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-9 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-10 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-11 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-12 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-13 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-14 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-15 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-16 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-17 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-18 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-19 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-20 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-21 Certificate, Downgraded to Ba1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-22 Certificate, Downgraded to Ba1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Downgraded to Ba1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-3 Trust Cl. I-A-1 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-2 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-3 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-4 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-5 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-6 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-7 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-8 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-9 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-10 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-11 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-12 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-13 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-14 Certificate, Downgraded to B1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-15 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-16 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-17 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-18 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-19 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-20 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-3 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-4 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-5 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. III-A-1 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-E Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-4 Trust Cl. A-1 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to B1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-12 Certificate, Downgraded to B1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-15 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-18 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-19 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-20 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-21 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-6 Trust Cl. A-1 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Ba3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-7 Trust Cl. A-1 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-12 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-15 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-18 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-19 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-20 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-21 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-22 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-23 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-24 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-25 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-26 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-27 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-28 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-29 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-30 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-31 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-32 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-33 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-34 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-35 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-36 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-37 Certificate, Downgraded to Baa1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-38 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-39 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-40 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-41 Certificate, Downgraded to Baa1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-42 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-43 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-44 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-45 Certificate, Downgraded to Baa1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-46 Certificate, Downgraded to Baa1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-47 Certificate, Downgraded to Baa1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-48 Certificate, Downgraded to Baa1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-49 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-50 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-51 Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to A3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-8 Trust Cl. I-A-1 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-2 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-3 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-4 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-5 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-6 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-7 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-8 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-9 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-10 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-11 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-12 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-13 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-14 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-15 Certificate, Downgraded to B1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-16 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-17 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-18 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-19 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-20 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-21 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-22 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-23 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-3 Certificate, Downgraded to B1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. II-A-4 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-5 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-6 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-7 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-8 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-9 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-10 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-11 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-12 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-14 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-15 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-16 Certificate, Downgraded to Ba3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-10 Trust Cl. I-A-1 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-2 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-3 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-4 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-5 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-6 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-7 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-8 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-9 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-10 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-11 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-12 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-13 Certificate, Confirmed at Aaa, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-14 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-15 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-16 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-17 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-18 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-19 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-20 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-21 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-22 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-23 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-24 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-25 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-26 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-27 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-28 Certificate, Downgraded to Ba3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-29 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-30 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-31 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-32 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-34 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-33 Certificate, Downgraded to B1, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. I-A-35 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-36 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-37 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-38 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-39 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-40 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. I-A-41 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-1 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-3 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-5 Certificate, Downgraded to A2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-6 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-7 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-8 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-9 Certificate, Downgraded to Baa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-10 Certificate, Downgraded to Ba3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. II-A-11 Certificate, Downgraded to Ba1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-12 Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-11 Trust Cl. A-1 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-2 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-3 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-4 Certificate, Downgraded to Aa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-5 Certificate, Downgraded to Aa2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-6 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-7 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-8 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-9 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-10 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-11 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-12 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-13 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-14 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-15 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-16 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-17 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-18 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-19 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-20 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-21 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-22 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-23 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-24 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-25 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-26 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-27 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-28 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-29 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-30 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-31 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-32 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-33 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-34 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-35 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-36 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-37 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-38 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-39 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-40 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-41 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-42 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-43 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-44 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-45 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-46 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-47 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-48 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-49 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-50 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-51 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-52 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-53 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-54 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-55 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-56 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-57 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-58 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-59 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-60 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-61 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-62 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-63 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-64 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-65 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-66 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-67 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-68 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-69 Certificate, Downgraded to Aa3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-70 Certificate, Downgraded to Aa3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-71 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-72 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-73 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-74 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-75 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-76 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-77 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-78 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-79 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-80 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-81 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-82 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-83 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-84 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-85 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-86 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-87 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-88 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-89 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-90 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-91 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-92 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-93 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-94 Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-95 Certificate, Downgraded to Aa3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-96 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-97 Certificate, Downgraded to Baa2, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. A-98 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-99 Certificate, Downgraded to Aa3, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. A-PO Certificate, Downgraded to Baa1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade -- Issuer: Wells Fargo Mortgage Backed Securities 2007-16 Trust Cl. II-A-1 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-2 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-3 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-4 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-5 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-6 Certificate, Downgraded to A1, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Cl. II-A-7 Certificate, Downgraded to Ba3, previously on 10/6/08 Aa1 Placed under Review for Possible Downgrade Cl. II-A-PO Certificate, Downgraded to Ba2, previously on 10/6/08 Aaa Placed under Review for Possible Downgrade Moody's calculates estimated losses for Jumbo RMBS in a two-stage process. First, serious delinquencies are projected through late 2009, primarily based upon recent historical performance. These projected delinquencies are converted into projected losses using lifetime roll rates (the probability of transition to default) averaging 40% for 60-day delinquencies, 75% for delinquencies greater than 90 days, and 90-100% for foreclosure or REO, and severity assumptions averaging 35%. The second step is to determine losses for the remaining life of the deal, following the projection period. Depending on a deal's performance, including delinquency, default, and prepayment rates, as well as collateral characteristics, such as loan type (fixed or adjustable), or loan-to-value ratios and geographic concentrations of remaining current loans, Moody's assumes varying degrees of slowing in the loss rate (which is measured by loss-to- liquidation) for the remaining life of the deal. Typical degrees of slowing in loss rate after late 2009 range from no slowing at all to 40% slowing. To take an example, a deal with very poor early performance due to relatively high loan-to-value ratios and dropping regional home values would be expected to see markedly high delinquency and loss rates for the next year. But the high rate of losses may be expected to slow afterwards, as economic factors and real estate values begin to stabilize, and a slowing of 20-40% may be used in the projection. On the other hand, a deal with stronger early performance that is demonstrating relative resiliency in the current market environment may not be expected to have high losses in the near-term, but may be expected to sustain a similar level of losses for the life of the deal, as the pool continues to be subject to factors that have more historically driven prime performance such as borrower life events, unemployment, and so on. Loss estimates are subject to variability and, as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly if necessary. X-RITE INC: CFO Discloses Ownership of 38,000 Equity Interest ------------------------------------------------------------- Bradley J. Freiburger, chief financial officer of X-Rite Inc., disclosed in a Form 3 filing with the Securities and Exchange Commission that he may be deemed to directly own 38,000 shares of the company's common stock. On Nov. 1, 2008, the number of outstanding shares of the company's common stock, par value $.10 per share, was 77,317,883. X-Rite Incorporated (NASDAQ:XRIT) -- http://www.xrite.com/-- including unit Pantone Inc., develops, manufactures, markets and supports innovative color solutions through measurement systems, software, color standards and services. X-Rite serves a range of industries, including printing, packaging, photography, graphic design, video, automotive, paints, plastics, textiles, dental and medical. * * * As reported in the Troubled Company Reporter on Nov. 10, 2008, Moody's Investors Service upgraded X-Rite, Incorporated corporate family rating to B3 from Caa1 and upgraded the rating of X-Rite's first lien senior secured credit facilities to B2 from B3 and the rating on its second lien term loan to Caa2 from Caa3. The actions acknowledge the material reduction in financial leverage (debt reduced to approximately $272 million from pre-equity infusion levels of $400 million) following the completion of the previously announced equity infusion and intended sale of life insurance policies. These ratings actions conclude the review for possible downgrade that was initiated on May 12, 2008. Moody's also upgraded the speculative grade liquidity rating to SGL-3 from SGL- 4. X-RITE INC: Appoints Bradley J. Freiburger as Interim CFO --------------------------------------------------------- X-Rite, Incorporated appointed Bradley J. Freiburger as interim chief financial officer of the company. He will succeed David A. Rawden, who has served as X-Rite's interim chief financial officer since May 2008 and is returning to Alix Partners. Mr. Freiburger has served as X-Rite's vice president and controller since March 2008, where he has been responsible for the oversight of budgeting and analysis, tax departments, worldwide general accounting, credit, accounts payable, consolidations, financial reporting and SEC reporting functions. Prior to his position with X-Rite, Mr. Freiburger held management positions with Ernst & Young and Arthur Andersen. Mr. Freiburger is a CPA and earned a master's degree in business administration from Michigan State University. Thomas J. Vacchiano Jr., chief executive officer for X-Rite, said, "[Mr. Freiburger's] extensive financial background and knowledge of the current landscape at X-Rite make him uniquely qualified for this role. Throughout the recent recapitalization process, [Mr. Freiburger] worked closely with the company's advisors to ensure all lender agreements and capital structure needs were fulfilled. He has been a great asset to our team and we appreciate him taking on additional responsibilities." Mr. Vacchiano added, "On behalf of everyone here at X-Rite, I want to thank [Mr. Rawden] for his hard work and his significant contributions to X-Rite. Our successful completion of a major recapitalization plan, which provided the company with the necessary financial flexibility to focus on future opportunities for the business of color, would have been significantly more challenging without his leadership and dedication. We wish him all the best in his future endeavors." The company also named William J. Cosgrove as a senior financial advisor for X-Rite. The company stated that Mr. Cosgrove is a nationally recognized leader in the automotive industry with over 40 years of experience. He retired from Ford Motor Company in March 2003 after 31 years. At the time of his retirement, Mr. Cosgrove was a corporate vice president at Ford and the chief financial officer and chief of staff for the Premier Automotive Group, Ford's London-based operating unit for its European luxury brands - Aston Martin, Jaguar, Land Rover and Volvo. Mr. Vacchiano concluded, "We are fortunate to have found someone with [Mr. Cosgrove's] extensive background, and believe he will serve as a great resource for the company. We look forward to working closely with Bill as a key partner of our senior management team, as he brings a deep understanding of the financial processes that will help support continuous improvement in our business performance." About X-Rite X-Rite Incorporated (NASDAQ:XRIT) -- http://www.xrite.com/-- including unit Pantone Inc., develops, manufactures, markets and supports innovative color solutions through measurement systems, software, color standards and services. X-Rite serves a range of industries, including printing, packaging, photography, graphic design, video, automotive, paints, plastics, textiles, dental and medical. * * * As reported in the Troubled Company Reporter on Nov. 10, 2008, Moody's Investors Service upgraded X-Rite, Incorporated corporate family rating to B3 from Caa1 and upgraded the rating of X-Rite's first lien senior secured credit facilities to B2 from B3 and the rating on its second lien term loan to Caa2 from Caa3. The actions acknowledge the material reduction in financial leverage (debt reduced to approximately $272 million from pre-equity infusion levels of $400 million) following the completion of the previously announced equity infusion and intended sale of life insurance policies. These ratings actions conclude the review for possible downgrade that was initiated on May 12, 2008. Moody's also upgraded the speculative grade liquidity rating to SGL-3 from SGL- 4. YELLOWSTONE MOUNTAIN: U.S. Trustee Forms 9-Member Creditors Panel ----------------------------------------------------------------- Robert D. Miller, Jr., the United States Trustee for Region 18, appointed nine creditors to serve on an Official Committee of Unsecured Creditors for Yellowstone Mountain Club LLC and its debtor-affiliates. The creditors committee members are: 1) Jorge Jasson c/o Robins, Kaplan, Miller & Ciresi, LLP 2800 LaSalle Plaza 800 LaSalle Avenue Minneapolis, MN 55402-2015 Tel: (612) 349-8282 2) William G. Griffon III 1901 Bearberry Lane Asheville, NC 28803 Tel: (828) 450-5281 3) Yoav Rubinstein 500 Queens Quay West, Suite 1101 E Toronto, ON M 5v 3K Tel: (203) 247-1850 4) NorthWestern Corporation Person c/o Michael E. Lewis 40 East Broadway Butte, MT 59701 Tel: (406) 497-2154 5) Story Distributing Company c/o Doug Alexander P.O. Box 1201 Bozeman, MT 59771 Tel: (406) 587-0702 6) Wilbur-Ellis Company c/o Bob Gaulke 1325 8th Ave. N. Great Falls, MT 59401 Tel: (406) 452-2619 7) Garlington, Lohn & Robinson, PLLP c/o Steven R. Brown 199 West Pine P.O. Box 7909 Missoula, MT 59807-7909 Tel: (406) 523-2500 8) Cowboy Equipment, LLC Roland Schumacher 80 Shire Trail Bozeman, MT 59718 Tel: (406) 587-0728 9) Curtco Robb Media, LLC c/o Chris Sabian P.O. Box 6167 Malibu, CA 90264 Tel: (310) 589-7711 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtor's expense. They may investigate the Debtor's business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual Chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtor is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. About Yellowstone Mountain Headquartered in Rancho, Mirage, Yellowstone Mountain Club LLC is a private ski and golf community about 20 miles from Yellowstone National Park. The company provides both residential units for sale on the development property along with membership interests. The company and three of its affiliates filed for Chapter 11 protection on Nov. 10, 2008 (Bankr. D. Mon. Lead Case No. 08-61570). James A. Ptten, Esq., at Patten, Peterman, Bekkedahl & Green PLLC, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed assets and debts between $100 million and $500 million each. YELLOWSTONE MOUNTAIN: Can Access $19.75 Mil. CrossHarbor Facility ----------------------------------------------------------------- The Deal's Ben Fidler reports that the Hon. Ralph Kirscher of the United States Bankruptcy Court for the District of Montana authorized Yellowstone Mountain Club LLC to obtain, on a final, basis, up to $19.75 million in postpetition financing from CrossHarbor Capital Partners LLC. Mr. Fidler says Judge Kirscher has not issued a final order as of Monday. There were certain modifications made to the financing but details were not immediately available, Mr. Fidler notes. CrossHarbor Capital's facility, which will mature on April 30, 2009, will incur interest at 15%, Mr. Fidler says. The lender will be paid a 3% commitment fee, he adds. In addition, CrossHarbor Capital required the Debtor to file a reorganization plan by Feb. 13, 2009, and have it confirmed by March 31, 2009, Mr. Fidler says. Otherwise, the Debtor are compelled to sell its assets by April 30, 2009, pursuant to Section 363 of the Bankruptcy Code, relates Mr. Fidler. According to the Deal, CrossHarbor's facility primes original DIP lender Credit Suisse Group who provided the Debtor about $4.45 million in postpetition financing with interest at 15%. About Yellowstone Mountain Headquartered in Rancho, Mirage, Yellowstone Mountain Club LLC is a private ski and golf community about 20 miles from Yellowstone National Park. The company provides both residential units for sale on the development property along with membership interests. The company and three of its affiliates filed for Chapter 11 protection on Nov. 10, 2008 (Bankr. D. Mon. Lead Case No. 08-61570). James A. Ptten, Esq., at Patten, Peterman, Bekkedahl & Green PLLC, represents the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed assets and debts between $100 million and $500 million each. * Fitch: U.S. Gaming Industry Will Remain Under Pressure in 2009 ---------------------------------------------------------------- Following one of its most challenging years in recent history, the U.S. gaming industry will remain under significant pressure in 2009, with a recovery unlikely until 2010, according to Fitch Ratings. With a view that the global economy is experiencing a severe recession, Fitch is forecasting the steepest GDP decline in the major advanced economies since World War II. The financial profile of the U.S. consumer is expected to remain stressed in 2009, as weak employment trends coupled with depressed real estate and equity prices continue to undermine consumer confidence. With net worth and personal income under pressure, and continued tight household credit conditions, Fitch expects U.S. consumer spending to decline a sharp 1.6% in 2009 and remain soft into 2010. These negative pressures will likely outweigh benefits to consumers from the decline in energy and commodity prices, in Fitch's view. The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected. Generally, gaming spend per visit has been affected more than visitation levels, which can be bolstered by promotions. Considering the combined effect of recent declines in gas prices, and reductions in airline capacity and international demand, Fitch believes regional/local markets will fare better than destination markets, such as the Las Vegas Strip. In its 2008 Outlook, Fitch indicated that it expected the gaming industry to be more economically sensitive than in previous downturns, which was clearly exhibited in the past year. Therefore, Fitch's macro-economic outlook weighs heavily on its 2009 gaming industry outlook. The main themes and questions that will affect gaming credit profiles and ratings in 2009 include: -- Credit Markets: Given the capital intensity of the business and refinancing risk, corporate gaming operators are heavily reliant on access to external capital sources. Will the credit markets begin to thaw after the New Year? If so, to what degree? A number of issuers are at increased risk of bumping up against covenants in 2009, and will be approaching credit facility expirations in 2010-2011. Therefore, the bank lending climate will become increasingly important as 2009 progresses. Harrah's and Station attempted to address near-term maturities and/or heavy LBO-related debt loads with debt exchanges, but Station was unsuccessful and Harrah's has yet to complete the transaction. MGM and Ameristar are other issuers with notable refinancing risk that will become more concerning as 2009 progresses, although MGM has recently enhanced its liquidity profile with a secured note issuance and an announced asset sale; -- Depth and Length of Recession: Will the U.S. economy begin to recover around mid-year 2009, or will the recession extend into late 2009 or 2010? Will a consumer spending recovery lag the broader economy? As the industry begins to anniversary the 2008 weakness, will pressure on operating results moderate? Or will there be another step down, fueled by the weak employment trends filtering through the economy? With unemployment expected to rise significantly throughout 2009, Fitch believes that a gaming industry recovery is unlikely until 2010, particularly if capital markets remain weak. Continued weak capital markets and rising unemployment would lead to sustained pressure on retiree investment portfolios and consumer confidence, resulting in constrained consumer discretionary spending. Therefore, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis; -- Supply Absorption: How will upcoming new supply be absorbed in Las Vegas amid weak demand? A significant amount of supply is planned to be added to the LV Strip market over the next 12-18 months including Wynn Encore, the Caesars Palace expansion, CityCenter, and Fontainebleau. Regarding the impact of the increase in supply, Fitch believes Wynn is extremely well positioned, but remains cautious on the credit profiles of MGM, LVS, and Harrah's . In addition, the Las Vegas Locals market needs to absorb the Eastside Cannery, Aliante Station, and M Resort supply additions, which will have a notable impact on both Station and Boyd. 2009 Credit Outlook: Fitch believes that a prolonged U.S. recession that extends beyond 2009 and into 2010, coupled with an extremely tight credit environment, will put significant additional pressure on the balance sheets of already stressed corporate gaming operators. There was a significant tick up in high yield (HY) gaming defaults in 2008, with five issuers (French Lick, Tropicana, Greektown, Herbst, and Majestic Star) defaulting on $2.3 billion of HY market principal through November 2008. Three other issuers (Trump, Station, and Harrah's) are on the cusp of defaulting on debt obligations. The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, so those issuers will have somewhat more ability to maintain ratings in 2009. Due to more stable free cash flow profiles, stronger internally generated liquidity positions, a less capital intensive business model, and more conservative balance sheet management, gaming suppliers have the most attractive overall credit profiles and greatest ability to weather the downturn. Continued Focus On Liquidity: Given the rapid deterioration of demand and highly leveraged balance sheets, the liquidity profiles of corporate gaming operators will remain a focus until credit markets ease and the economy stabilizes. Over the course of 2008, numerous gaming operators increasingly pulled back on planned expansion projects, reducing expected capital expenditures in an effort to improve free cash flow profiles. As the credit crisis worsened, some companies went further and slashed upcoming maintenance capex budgets and reduced labor forces. While cutting maintenance capex levels provides some short-term liquidity relief, if sustained too long, it will be detrimental to longer-term credit profiles by compromising asset quality. The bank lending environment will be a key factor as 2009 progresses, as a number of issuers are in danger of bumping up against credit facility covenants. In addition, a number of corporate gaming credit facilities expire in the late 2010-2011 time frame. Those companies will want to avoid those liabilities becoming current, which means that a number of new agreements are likely to be entered into by the end of 2009/early 2010. It is clear the terms will be much more costly than those of the existing agreements that were entered into during a more accommodating credit environment. In addition, Fitch believes there may be downward pressure on the size of the commitments as investment banks seek to limit their own balance sheet exposure, as was the case in Mohegan's credit facility amendment on Dec. 10. Downsized commitments will contribute to a slower growth rate for the industry over the next three-to-five years. Fitch published a sector liquidity overview in a report on Oct. 23 (Liquidity Focus: U.S. Gaming & Lodging) and follow-up comment on Nov. 14 (Fitch Provides Update on Recent Gaming Liquidity Trends). Of the seven issuers that were noted with weak or weak-to-moderate liquidity profiles, three companies (Trump, Station, and Harrah's) are now on the cusp of defaulting on their obligations. Two others, LVS and MGM, announced significant capital raising transactions since Fitch's initial report. LVS completed a highly dilutive $2.1 billion equity sale, while MGM issued a $750 million secured note sale priced to yield 15%, and also announced a $775 million asset sale. The remaining two issuers, Ameristar and Pinnacle, have less immediate needs and minimal upcoming bond maturities, but will likely need to address potential covenant violations with their banks in 2009. Distressed Transactions: Given the pressure on operating cash flow, current depressed debt prices, and limited refinancing options, distressed transactions are likely to continue. Harrah's and Station have been negotiating with bondholders regarding the terms of distressed debt exchanges (DDEs), which is one of three definitions of default according to Fitch's published criteria (the other two include failure to make an interest/principal payment, or a bankruptcy filing or liquidation). Station announced on Dec. 15 that conditions of the exchange would not be met, so it terminated the exchange offer. Harrah's exchange offer expires on Dec. 19, 2008. Although Native American issuers maintain generally more conservative financial profiles than corporate gaming operators, their credit profiles have also come under pressure due to the macro economic environment. To date, Fitch is unaware of a distressed workout situation occurring in relation to the bonds of a Native American gaming issuer, and believes that a DDE would be the most likely outcome of a workout scenario. Concurrent with this outlook, Fitch published, 'Workout Scenario Considerations for Creditors of Native American Gaming Operators,' dated Dec. 16 and available at 'http://www.fitchratings.com'. To the extent that credit markets remain tight, Fitch believes there will be increasing pressure for companies to engage in both casino and non-operating asset sales in 2009. However, Fitch believes potential buyers are limited and credit markets conditions would make it difficult to complete a transaction. Despite that, MGM announced on Dec. 15, 2008, that it is selling Treasure Island to Phil Ruffin, who previously sold the New Frontier site and is able to provide largely cash financing for the transaction. The $775 million purchase price will consist of $500 million in cash at closing and $275 million in secured notes. Penn National and Boyd Gaming, with their relatively more attractive balance sheets, may be able to consider operating asset purchases early in the credit stabilization cycle. Wynn also maintains an attractive liquidity profile and clearly has the balance sheet to be a buyer. However, Fitch believes that the company may be more inclined to purchase attractive real estate for future development, rather than operating assets that are not a strategic fit with its brand. Market Outlook: Same-store gaming revenues in many large jurisdictions are down in the mid-to-high single-digit range so far in 2008, and due to operating leverage, property same-store cash flow declines can be greater. The declines since September are notably worse than year-to-date figures and Fitch believes that gaming operating trends are likely to remain weak well into 2009. Fitch believes it is clear that there will be significant operating pressure in the first half of 2009. Although year-over-year comparisons will get easier in the second-half of 2009, Fitch does not believe there will be a meaningful gaming recovery until 2010. Specifically, Fitch's current Outlook incorporates operating declines in 2009 at best similar to 2008 on a same-store basis. The largest commercial markets, Las Vegas and Atlantic City, are experiencing some of the most significant demand pressure, which Fitch expects to continue into 2009. Las Vegas Strip revenues have declined 8.7% year-to-date through October, while Atlantic City revenues have declined 6.7% year-to-date through November. In addition to the consumer-driven demand pressures, those markets are facing additional challenges from competitive supply increases. The largest Native American markets of California and Connecticut are also experiencing significant demand pressure. In addition, some Californian Native American operators are struggling to offset increased fees associated with amended state Class III gaming compacts signed in 2008 that allowed additional supply. Certain regions have held up better, such as the mid-south, where high energy prices for much of the year supported that regional economy. However, the recent pullback in energy prices may pressure the region in upcoming months. Other less mature markets in the northeast, specifically Pennsylvania, New York, and Rhode Island, continued to grow in 2008, resulting in notable competitive pressure on the more mature markets of Atlantic City and Connecticut. Internationally, growth in Macau will moderate in 2009, following several years of extremely high growth that enabled it to surpass the Las Vegas Strip as the world's largest market. The government has recently implemented visa restrictions and LVS has pulled back on Cotai Strip development plans. In addition, the opening of the Singapore market in 2009-2010 will likely have an impact on Macau. In terms of the operating environment, Singapore has a lower tax rate and much more limited competition than Macau, which provides incentive for LVS to market its Singapore property more heavily than Macau to its regional customers. Regulatory Environment in 2009: State budgets are likely to be increasingly under pressure in the next few years, which historically has provided governments with incentive to consider gaming as a revenue source for budget shortfalls. However, legislators are likely to be less optimistic regarding gaming taxes as a lucrative revenue stream. Gaming tax revenues have not met expectations in a number of jurisdictions that recently legalized or expanded gaming. In addition, with unfavorable credit markets and struggling corporate operators, there is likely to be limited appetite for funding new developments. Investment appetite will be further dampened if governments continue to seek extremely high tax rates of 50%+, which has been the case in the states that most recently legalized gaming such as Maryland, New York and Pennsylvania. For example, there has been very limited recent interest from major corporate gaming operators for Atlantic City's Bader Field development and Illinois' 10th gaming license. Kansas passed gaming legislation in 2007 and opened the bidding process for commercial casino developments, but the ensuing economic turmoil contributed to a number of developers withdrawing their bids. The state is now likely to rebid some licenses with more liberal rules. Native American expansion opportunities may be more likely than commercial expansion, as recently implemented revenue sharing rates under Class III gaming compacts have generally been more reasonable than commercial gaming tax rates for new jurisdictions. In addition, Fitch believes that gaming expansions may be more likely a result of relaxed gaming regulations. In 2009, regulatory changes in certain markets will provide some credit support to certain issuers. Regional operators such as Ameristar, Isle of Capri, Pinnacle and Penn National will benefit from the recent easing of gaming restrictions in Missouri and Colorado. Missouri recently eliminated the $500 loss limit in exchange for a 1% point increase in the tax rate. Colorado raised its betting limit to $100 from $5 and increased daily hours of operation to 24 from 18. The Seminole Tribe of Florida continues to implement table games at its properties pursuant to the Class III compact it signed in 2007, which has helped offset demand pressure. However, the Florida state legislature has yet to approve the terms of the compact. Smoking bans remain a secular challenge for the industry, as political pressure mounts in states across the nation. In 2008, gaming revenues in Illinois, Colorado, and New Jersey were affected by smoking bans. Gaming operators received a temporary reprieve in New Jersey, where a full ban was recently delayed by a year in lieu of maintaining a partial ban. Although pressure has increased to enact similar restrictions at Native American casinos, those operators maintain more flexibility due to their sovereign status under U.S. law. Sub-Sector Outlooks: With respect to sub-sector outlooks, Fitch is providing both a Fundamental Outlook and a Rating Outlook. The Fundamental Outlook indicates the operating trends at the sub-sector level, and can differ from the Rating Outlook. The Rating Outlook incorporates a level of operating deterioration or improvement, and considers the unique credit profiles of the issuers relative to the Fundamental Outlook. The Rating Outlook is largely based on the published Outlooks in Fitch's rated portfolio. Corporate Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Negative The weak fundamental trends combined with generally high leverage and tight liquidity provides the basis for Fitch's negative outlook on corporate gaming operators in terms of both operating fundamentals and credit ratings. Native American Gaming Operators -- Fundamental Outlook: Negative -- Rating Outlook: Stable-to-Negative While Native American gaming operators are feeling similar pressure on operating trends, the issuers in Fitch's rated portfolio generally maintain more conservative financial profiles relative to rating levels, and will have more ability to maintain ratings in 2009. Gaming Suppliers -- Fundamental Outlook: Stable -- Rating Outlook: Stable-to-Positive There is pressure on gaming operators' maintenance capital budgets, and the server-based replacement cycle has been slower- than-anticipated. However, the slot replacement cycle was already at a trough, so the demand reduction will be limited, in Fitch's view, and demand will be supported from new casino openings. The Positive Rating Outlook is based on Bally's strong market share gains since its operating turnaround, and the potential removal of certain credit-specific rating issues. SELECT U.S. GAMING ISSUERS Corporate Gaming Operators (IDR/Outlook) -- Ameristar Casinos, Inc. (Not Publicly Rated); -- Boyd Gaming Corp. ('BB-'/Outlook Stable); -- Harrah's Entertainment, Inc. (Not Publicly Rated); -- Isle of Capri Casinos, Inc. (Not Publicly Rated); -- Las Vegas Sands Corp. (Not Publicly Rated); -- MGM MIRAGE ('BB-'/Outlook Negative); -- Penn National Gaming, Inc. (Not Publicly Rated) -- Pinnacle Entertainment ('B'/Outlook Negative) -- Station Casinos, Inc. (Not Publicly Rated); -- Trump Entertainment Resorts, Inc. (Not Publicly Rated); -- Wynn Resorts Ltd. (Not Publicly Rated). Native American Gaming Operators (Issuer Rating/Outlook) -- Agua Caliente Band of Cahuilla Indians, CA ('BBB-'/ Outlook Negative); -- Cow Creek Band of Umpqua Tribe of Indians, OR (Not Publicly Rated); -- CTCLUSI: Confederated Tribes of the Coos, Lower Umpqua and Siuslaw Indians, OR (Not Publicly Rated); -- Kalispel Tribe (Not Publicly Rated); -- Laguna Development Corp., NM ('BB-'/Outlook Stable); -- Mashantucket Pequot Tribal Nation (Not Publicly Rated); -- Mohegan Tribal Gaming Authority (Not Publicly Rated); -- Morongo Band of Mission Indians, CA (Not Publicly Rated); -- Pueblo of Santa Ana, NM ('BB'/Outlook Stable); -- Quechan Tribe of the Fort Yuma Indian Reservation ('CCC'/ Negative Watch); -- San Manuel Entertainment Authority, CA ('BBB-'/Outlook Stable); -- Santa Rosa Rancheria Tachi Yokut Tribe, CA (Not Publicly Rated); -- Seminole Tribe of Florida ('BBB-'/Outlook Stable); -- Seneca Gaming Corp. (Not Publicly Rated). Gaming Suppliers (IDR/Outlook) -- Bally Technologies ('BB-'/Outlook Positive) -- International Game Technology (Not Publicly Rated) -- WMS Industries, Inc. (Not Publicly Rated) * Moody's Cuts Ratings on 348 Notes Issued by 166 SF CDOs in 2006 ----------------------------------------------------------------- Moody's Investors Service has downgraded its ratings of 348 Notes issued by certain collateralized debt obligation transactions backed by structured finance securities, each of which originated in 2006. Moody's explained that the rating actions taken are the result of the application of revised and updated key modelling parameter assumptions that Moody's uses to rate and monitor ratings of SF CDOs. The revisions affect the three key parameters in Moody's model for rating SF CDOs: asset correlation, default probability and recovery rate. Moody's announced the changes to these assumptions in a press release titled "Moody's Updates its Key Assumptions for Rating Structured Finance CDOs," published on December 11, 2008. Moody's noted that most of the lowered ratings remain on review for possible downgrade due to the continuing weakness in the performance of and outlook for structured finance securities that back SF CDOs. Moody's anticipates that in the coming days it will announce additional rating actions applicable to SF CDOs of earlier vintages as the revised assumptions are applied to those transactions. The rating actions are: Silver Elms CDO plc Class Description: $490,000,000 Class A-1a Floating Rate Notes, Due 2051 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/29/2008 Class Description: $133,000,000 Class A-1b Delayed Draw Floating Rate Notes, Due 2051 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/29/2008 Caldecott CDO 1, Ltd. Class Description: U.S.$200,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes Due 2048 Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 6/2/2008 Ischus Synthetic ABS CDO 2006-2 Ltd. Class Description: U.S. $575,000,000 Class A-1LA Investor Swap Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 4/30/2008 Pacific Pinnacle CDO Ltd Class Description: U.S.$800,000,000 Class A-1LA Floating Rate Notes Due January 2052 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 8/26/2008 Class Description: Class X Interest Only Notes Due January 2019 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 8/26/2008 Lunar Funding V Plc Class Description: Series 2006-27 Secured Floating Rate Credit- linked Notes due 2052-1 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 4/29/2008 Sheffield CDO II, Ltd. Class Description: U.S.$ 9,000,000 Class S Senior Secured Floating Rate Notes due 2051 Current Rating: Aaa, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 12/21/2006 Class Description: U.S.$169,300,000 Class A-1 Variable Funding Notes due 2051 Current Rating: A1, under review for possible downgrade Prior Rating: Aa1, under review for possible downgrade Prior Rating Date: 10/6/2008 Class Description: U.S.$32,500,000 Class A-2 Senior Secured Floating Rate Notes due 2051 Current Rating: A3, under review for possible downgrade Prior Rating: Aa3, under review for possible downgrade Prior Rating Date: 10/6/2008 Class Description: U.S.$32,500,000 Class A-3 Senior Secured Floating Rate Notes due 2051 Current Rating: Baa1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 10/6/2008 Class Description: U.S.$31,600,000 Class B Senior Secured Floating Rate Notes due 2051 Current Rating: Ba2, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 10/6/2008 Triaxx Prime CDO 2006-2, Ltd. Class Description: U.S.$1,500,000,000 Class A-1A First Priority Senior Secured Floating Rate Notes Due October 2039 Current Rating: Aa1, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 12/21/2006 Class Description: U.S.$1,499,950,000 Class A-1B1 First Priority Senior Secured Floating Rate Notes Due October 2039 Current Rating: Aa2, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 12/21/2006 Class Description: U.S.$1,499,950,000 Class A-1B2 First Priority Senior Secured Floating Rate Notes Due October 2039 Current Rating: Aa2, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 12/21/2006 Class Description: U.S.$100,000 Class A-1BV First Priority Senior Secured Floating Rate Notes Due October 2039 Current Rating: Aa2, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 12/21/2006 Class Description: U.S.$400,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due October 2039 Current Rating: Aa3, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 12/21/2006 Class Description: U.S.$60,000,000 Class B Third Priority Senior Secured Floating Rate Notes Due October 2039 Current Rating: A2, under review for possible downgrade Prior Rating: Aa2 Prior Rating Date: 12/21/2006 Class Description: U.S.$20,000,000 Class X Fourth Priority Junior Secured Amortizing Deferrable Floating Rate Notes Due October 2039 Current Rating: Baa1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 10/20/2008 Class Description: U.S.$20,000,000 Class C Fifth Priority Junior Secured Deferrable Floating Rate Notes Due October 2039 Current Rating: Baa2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 10/20/2008 Barramundi CDO I Ltd. Class Description: Up to U.S.$540,400,000 Class A-1 Senior Secured Floating Rate Notes Due December 2051 Current Rating: Caa3, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$56,000,000 Class A-2 Senior Secured Floating Rate Notes Due December 2051 Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$76,000,000 Class B Senior Secured Floating Rate Notes Due December 2051 Current Rating: Ca Prior Rating: Caa3, under review for possible downgrade Prior Rating Date: 5/8/2008 Calculus ABS Resecuritization Trust, Series 2006-5 Class Description: US $15,000,000 Calculus ABS Resecuritization Trust, Series 2006-5 Units Current Rating: Baa3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 9/25/2008 Calculus ABS Resecuritization Trust, Series 2006-6 Class Description: US $6,670,000 Calculus Resecuritization Trust Series 2006-6 Units Current Rating: Baa1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 9/25/2008 HSPI Diversified CDO Fund I, Ltd. Class Description: U.S. $22,900,000 Class S Senior Secured Floating Rate Notes due 2014 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 9/2/2008 Blue Edge ABS CDO Ltd. Class Description: Up to U.S.$1,076,250,000 Class A-1 Floating Rate Notes Due 2050 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 6/2/2008 Fortius II Funding, Ltd. Class Description: U.S.$ 12,700,000 Class S Floating Rate Notes Due 2010 Current Rating: Baa3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 10/15/2008 Mantoloking CDO 2006-1, Ltd. Class Description: U.S.$375,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes due 2046 Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 10/6/2008 Orion 2006-2, Ltd. Class Description: U.S.$34,000,000 Class S Senior Secured Floating Rate Notes Due 2014 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 8/26/2008 Strata Trust, Series 2006-24 Class Description: U.S. $55,000,000 Floating Rate Notes due December 21, 2016 Current Rating: A2, under review for possible downgrade Prior Rating: Aa2, under review for possible downgrade Prior Rating Date: 9/29/2008 West Trade Funding CDO II Ltd. Class Description: U.S.$900,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes due 2051 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/29/2008 Davis Square Funding VII, Ltd. Class Description: U.S. $ 20,000,000 Class S Floating Rate Notes Due 2015 Current Rating: Aaa, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 1/16/2007 Nassau CDO I, Ltd. Class Description: U.S.$600,000,000 Class A-1A First Priority Senior Secured Delayed Draw Floating Rate Notes Due 2051 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/5/2008 Class Description: U.S.$600,000,000 Class A-1B First Priority Senior Secured Floating Rate Notes Due 2051 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/5/2008 Citius II Funding, Ltd. Class Description: Up to U.S.$1,800,000,000 aggregate Principal Component of commercial paper notes/Class A ST Notes Due 2047 Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/23/2008 Abacus 2006-HGS1, Ltd. Class A-1 Class Description: U.S.$99,000,000 Class A-1 Variable Rate Notes, Due 2039 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/9/2008 Centre Square CDO, Ltd. Class Description: U.S.$150,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes due 2051 Current Rating: C Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 6/3/2008 Class Description: U.S.$97,500,000 Class A-2A Second Priority Senior Secured Floating Rate Notes due 2051 Current Rating: C Prior Rating: Ca Prior Rating Date: 6/3/2008 Class Description: U.S.$97,500,000 Class A-2B Second Priority Senior Secured Floating Rate Notes due 2051 Current Rating: C Prior Rating: Ca Prior Rating Date: 6/3/2008 Class Description: U.S.$25,000,000 Class A-3 Third Priority Senior Secured Floating Rate Notes due 2051 Current Rating: C Prior Rating: Ca Prior Rating Date: 6/3/2008 Class Description: U.S.$50,000,000 Class B Fourth Priority Senior Secured Floating Rate Notes due 2051 Current Rating: C Prior Rating: Ca Prior Rating Date: 4/3/2008 Class Description: U.S.$22,000,000 Class C Fifth Priority Senior Secured Floating Rate Notes due 2051 Current Rating: C Prior Rating: Ca Prior Rating Date: 4/3/2008 BFC Ajax CDO Ltd. Class Description: U.S.$275,000,000 Class A Senior Floating Rate Notes Due 2046 Current Rating: B2, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 6/25/2008 Class Description: U.S.$15,000,000 Class B Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/23/2008 Pine Mountain CDO II Ltd. Class Description: $392,750,000 Class A Floating Rate Notes Due November 30, 2046 Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/18/2008 Buchanan 2006-I Segregated Portfolio Class Description: U.S.$115,000,000 Variable Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 4/24/2008 Buchanan 2006-II Segregated Portfolio Class Description: U.S.$72,000,000 Variable Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/24/2008 Buchanan 2006-III Segregated Portfolio Class Description: U.S.$10,000,000 Variable Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 4/24/2008 Buchanan 2006-IV Segregated Portfolio Class Description: U.S.$4,000,000 Variable Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 4/24/2008 Orient Point CDO II, Ltd. Class Description: U.S.$1,350,000,000 Class A First Priority Senior Secured Floating Rate Notes due 2051 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 6/4/2008 AMP ABX 2006-1, Ltd. Class Description: U.S.$65,000,000 Notes Due 2036 Current Rating: A3, under review for possible downgrade Prior Rating: Aa3, under review for possible downgrade Prior Rating Date: 9/25/2008 IXIS ABS CDO 3 Ltd. Class Description: U.S.$16,000,000 Class X Notes Due December 2013 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S.$76,000,000 Class A-1LB Floating Rate Notes Due December 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: Class A-1LA Investor Swap Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/30/2008 IMAC CDO 2006-1, Ltd. Class Description: U.S.$75,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes due 2051 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/30/2008 Istana High Grade ABS CDO I, Ltd. Class Description: U.S.$600,000,000 Class A-1 First Priority Delayed Draw Floating Rate Notes Due 2048 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 10/27/2008 House of Europe Funding V PLC Class Description: EUR 200,000,000 Class A1 House of Europe Funding V PLC Delayed Draw Note due 2090 Current Rating: Aa3, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 11/3/2006 Class Description: EUR 580,000,000 Class A1 House of Europe Funding V PLC Floating Rate Notes due 2090 Current Rating: Aa3, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 11/3/2006 Class Description: EUR 70,000,000 Class A2 House of Europe Funding V PLC Floating Rate Notes due 2090 Current Rating: A2, under review for possible downgrade Prior Rating: Aa2, under review for possible downgrade Prior Rating Date: 10/9/2008 Class Description: EUR 70,000,000 Class A3-a House of Europe Funding V PLC Floating Rate Notes due 2090 Current Rating: Ba2, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 10/9/2008 Class Description: EUR 15,000,000 Class A3-b House of Europe Funding V PLC Fixed Rate Notes due 2090 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 10/9/2008 Class Description: EUR 21,000,000 Class B House of Europe Funding V PLC Floating Rate Notes due 2090 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/9/2008 Fort Duquesne CDO 2006-1 Ltd. Class Description: U.S.$11,000,000 Class X Senior Secured Notes Due 2046 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 10/27/2008 Class Description: U.S.$450,000,000 Class A-1A Senior Secured Floating Rate Notes Due 2046 Current Rating: Baa1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 10/27/2008 Grand Avenue CDO II, Ltd. Class Description: U.S.$1,128,000,000 Class A-1A Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/2/2008 Kent Funding III, Ltd. Class Description: U.S.$780,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes due 2047 Current Rating: Ba1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S.$325,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes due 2047 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/30/2008 Halcyon Securitized Products Investors ABS CDO I Ltd. Class Description: Class A-1 Senior Secured Floating Rate Notes, due 2050 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 5/18/2008 Class Description: Class A-2 Senior Secured Floating Rate Notes, due 2050 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/18/2008 Ixion PLC HELD 2006-1 Class Description: Series 1 HELD 2006 - 1 USD 242,000,000 Floating Rate Credit Linked Secured Notes due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 4/23/2008 Calculus ABS Resecuritization Trust, Series 4 Class Description: US $15,000,000 Calculus ABS Resecuritization Trust, Series 2006-4 Units Current Rating: Baa3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 9/26/2008 ABACUS 2006-15, Ltd. (Class A-2) Class Description: U.S.$70,000,000 Class A-2 Variable Rate Notes, Due 2045 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 4/29/2008 Parapet 2006 Ltd. Class Description: U.S.$137,500,000 Class A Floating Rate Notes Due 2045 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/30/2008 LOCHSONG, LTD. Class Description: U.S.$ 12,100,000 Class S Floating Rate Notes Due 2010 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 9/3/2008 Pyxis ABS CDO 2006-1 Ltd. Class Description: Senior Swap Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/18/2008 Altius III Funding, Ltd. Class Description: U.S.$ 17,500,000 Class S Floating Rate Notes Due 2014 Current Rating: Aaa, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 9/29/2006 Class Description: U.S.$ 220,000,000 Class A-1a Floating Rate Notes Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/23/2008 Class Description: U.S.$ 499,950,000 Class A-1b-1F Floating Rate Notes Due 2041 Current Rating: Ba1, under review for possible downgrade Prior Rating: Baa1, under review for possible downgrade Prior Rating Date: 10/23/2008 Class Description: U.S.$ 300,000,000 Class A-1b-2 Floating Rate Notes Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/23/2008 Class Description: U.S.$ 250,000,000 Class A-1b-3 Floating Rate Notes Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/23/2008 Class Description: U.S.$ 100,000 Class A-1b-v Floating Rate Notes Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/23/2008 Wadsworth CDO, Ltd. Class Description: U.S.$800,000,000 Class A-1A Senior Secured Floating Rate Notes due 2046 Current Rating: Ba2, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 6/25/2008 Class Description: U.S.$256,000,000 Class A-1B Senior Secured Floating Rate Notes due 2046 Current Rating: Ba2, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 6/25/2008 Commodore CDO V, Ltd. Class Description: U.S.$75,000,000 Class A-1A First Priority Senior Secured Floating Rate Delayed Draw Notes Due 2047 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/2/2008 Class Description: U.S.$225,000,000 Class A-1B Second Priority Senior Secured Floating Rate Notes Due 2047 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/2/2008 Rutland Rated Investments Series 31 (Millbrook 2006-4) Class Description: Series 31 (Millbrook 2006-4) USD 15,500,000 Asset Backed Securities Class A Variable Rate Credit-Linked Notes due May 2046 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 4/24/2008 Rutland Rated Investments Series 32 (Millbrook 2006-4) Class Description: Series 32 (Millbrook 2006-4) USD 42,000,000 Asset Backed Securities Class B Variable Rate Credit-Linked Notes due May 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 4/24/2008 Abacus 2006-11, Ltd. Class Description: U.S.$45,937,500 Class A-2 Variable Rate Notes, Due 2045, Series 1 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 4/29/2008 Class Description: U.S.$45,937,500 Class A-2 Variable Rate Notes, Due 2045, Series 2 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 4/29/2008 Class Description: U.S.$82,500,000 Class A-1 Variable Rate Notes, Due 2045 Current Rating: Baa2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 4/29/2008 Class Description: U.S.$19,375,000 Class B Variable Rate Notes, Due 2045 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 4/29/2008 Class Description: U.S.$18,750,000 Class C Variable Rate Notes, Due 2045 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 4/29/2008 Class Description: U.S. $12,500,000 Class B Series 2 Variable Rate Notes Due 2045 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 4/29/2008 Calculus ABS Resecuritization Trust, Series 2006-3 Class Description: U.S. $5,500,000 CALCULUS ABS RESECURITIZATION TRUST, SERIES 2006-3 UNITS Current Rating: Baa1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 9/25/2008 Calculus ABS Resecuritization Trust, Series 2006-1 Class Description: US $71,500,000 CALCULUS ABS RESECURITIZATION TRUST, SERIES 2006-1 UNITS Current Rating: Baa3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 9/25/2008 Calculus ABS Resecuritization Trust, Series 2006-2 Class Description: US $10,000,000 CALCULUS ABS RESECURITIZATION TRUST, SERIES 2006-2 UNITS Current Rating: Baa1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 9/25/2008 ESP Funding I, Ltd. Class Description: U.S.$225,000,000 Advance Swap between IXIS Financial Products ("Party A") and ESP Funding I, Ltd. ("Party B") Current Rating: Ba1, under review for possible downgrade Prior Rating: Baa1, under review for possible downgrade Prior Rating Date: 9/26/2008 Triaxx Prime CDO 2006-1, Ltd. Class Description: U.S.$2,400,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes due March 2039 Current Rating: Aa2, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 9/22/2006 Class Description: U.S.$213,600,000 Class A-2 Second Priority Senior Secured Floating Rate Notes due March 2039 Current Rating: Aa3, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 9/22/2006 Class Description: U.S.$32,000,000 Class B Third Priority Senior Secured Floating Rate Notes due March 2039 Current Rating: A2, under review for possible downgrade Prior Rating: Aa2, under review for possible downgrade Prior Rating Date: 11/5/2008 Class Description: U.S.$10,700,000 Class X Fourth Priority Junior Secured Amortizing Deferrable Floating Rate Notes due March 2039 Current Rating: Baa1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 11/5/2008 Class Description: U.S.$10,700,000 Class C Fifth Priority Junior Secured Deferrable Floating Rate Notes due March 2039 Current Rating: Baa2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 11/5/2008 E*TRADE ABS CDO V, Ltd. Class Description: U.S.$201,000,000 Class A-1S Senior Secured Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/18/2008 Buckingham CDO III Ltd. Class Description: Up to U.S. $1,350,000,000 Class A ST Notes Due 2051 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: Up to U.S. $1,350,000,000 Class A LT Notes Due 2051 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/8/2008 Mayflower CDO I Ltd. Class Description: U.S.$20,000,000 Class X Notes Due September 2012 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: U.S.$157,000,000 Class A-1LB Floating Rate Notes Due June 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: U.S.$609,000,000 Class A-1LA Investor Swap Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/9/2008 Strata Trust, Series 2006-20 Class Description: U.S. $43,000,000 Floating Rate Notes due September 21, 2013 Current Rating: A3, under review for possible downgrade Prior Rating: Aa3, under review for possible downgrade Prior Rating Date: 8/5/2008 Coldwater CDO, Ltd. Class Description: U.S. $290,000,000 Class A-1 Floating Rate Senior Secured Notes due 2046 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/8/2008 Stillwater ABS CDO 2006-1, Ltd. Class Description: Class A-1 First Priority Senior Secured Floating Rate Term Notes Due 2046 Current Rating: Ba2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 7/30/2008 Tower Hill CDO, Ltd. Class Description: U.S.$100,000,000 Class A-1 Senior Secured Floating Rate Notes Due 2016 Current Rating: A3, under review for possible downgrade Prior Rating: Aa3 Prior Rating Date: 10/15/2008 Class Description: U.S.$112,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2016 Current Rating: Baa2, under review for possible downgrade Prior Rating: A2 Prior Rating Date: 10/15/2008 Class Description: U.S.$72,000,000 Class B Senior Secured Deferrable Interest Floating Rate Notes Due 2016 Current Rating: Ba1, under review for possible downgrade Prior Rating: Baa1 Prior Rating Date: 10/15/2008 Class Description: U.S.$24,000,000 Class C Senior Secured Deferrable Interest Floating Rate Notes Due 2016 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3 Prior Rating Date: 10/15/2008 Class Description: U.S.$60,000,000 Class D Senior Secured Deferrable Interest Floating Rate Notes Due 2016 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1 Prior Rating Date: 10/15/2008 Jupiter International 2006-1 Class Description: Jupiter 2006-1 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3 Prior Rating Date: 8/24/2008 NORTH COVE CDO III, LTD. Class Description: Unfunded supersenior tranche Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 10/28/2008 ABACUS 2006-9, Ltd. Class Description: U.S. $40,625,000 Class A-2 Variable Rate Notes, Due 2041 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S. $35,937,500 Class B Variable Rate Notes, Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S. $25,000,000 Class A-1 Variable Rate Notes Due 2041 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/30/2008 ART CDO 2006-1, Ltd. Class Description: U.S.$865,000,000 Class A1S Senior Floating Rate Notes Due August 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 9/23/2008 Duke Funding XI, Ltd. Class Description: EUR33,000,000 Class X Floating Rate Notes Due 2013 Current Rating: Caa2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 5/1/2008 Class Description: EUR132,000,000 Class A-1E Floating Rate Notes Due 2046 Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/1/2008 Class Description: EUR88,000,000 Class A-2E Floating Rate Notes Due 2046 Current Rating: Ca Prior Rating: Caa3, under review for possible downgrade Prior Rating Date: 5/1/2008 Class Description: EUR704,000,000 Senior Swap Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 5/1/2008 Eolo Investments B.V. in respect of the Series 2006-1 Class Description: Series 2006-1 Current Rating: Baa3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 10/1/2008 Ridgeway Court Funding I, Ltd. Class Description: Class A1M Notes Current Rating: B2, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 5/23/2008 Class Description: Class A1Q Notes Current Rating: B2, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 5/23/2008 Class Description: Class A2 Notes Current Rating: Ca Prior Rating: Caa3, under review for possible downgrade Prior Rating Date: 5/23/2008 ARLO VI Limited 2006-4 (SABS) Class Description: U.S. $15,000,000 Variable Secured Limited Recourse Credit-Linked Notes due 2040 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 4/24/2008 Marathon Structured Finance CDO I, Ltd. Class Description: U.S. $30,000,000 Class A-1 Floating Rate Delayed Draw Notes Due 2046 Current Rating: Aa2, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 11/29/2006 Class Description: U.S. $128,000,000 Class A-1 Floating Rate Term Notes Due 2046 Current Rating: Aa2, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 11/29/2006 Class Description: U.S. $18,000,000 A-2 Floating Rate Notes Due 2046 Current Rating: Aa3, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 11/29/2006 Class Description: U.S. $63,000,000 Class B Floating Rate Notes Due 2046 Current Rating: A2, under review for possible downgrade Prior Rating: Aa2 Prior Rating Date: 11/29/2006 Class Description: U.S. $15,000,000 Class C Deferrable Floating Rate Notes Due 2046 Current Rating: Baa3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S. $22,900,000 Class D Deferrable Floating Rate Notes Due 2046 Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 5/30/2008 West Coast Funding I, Ltd. Class Description: U.S.$ 1,187,950,000 Class A-1a Floating Rate Notes Due 2041 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$ 1,187,950,000 Class A-1b Floating Rate Notes Due 2041 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$100,000 Class A-1v Floating Rate Notes Due 2041 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$81,000,000 Class A-2 Floating Rate Notes Due 2041 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$81,000,000 Class A-3 Floating Rate Notes Due 2041 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$54,000,000 Class B Floating Rate Notes Due 2041 Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$60,750,000 Class C Deferrable Floating Rate Notes Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$10,000,000 Combination Notes Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/8/2008 Baldwin 2006-VII Segregated Portfolio Class Description: Class A-1 Notes Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 7/29/2008 Knollwood CDO II Ltd. Class Description: Class A-1VF First Priority Senior Secured Floating Rate Notes Due 2046 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/23/2008 Class Description: Class A-2S Second Priority Senior Secured Floating Rate Notes Due 2046 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 4/23/2008 Class Description: Class A-2J Third Priority Senior Secured Floating Rate Notes Due 2046 Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 4/23/2008 Class Description: Class B Fourth Priority Senior Secured Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 4/23/2008 ARLO VI Limited 2006-3 (SABS) Class Description: U.S. $ 10,000,000 Initial Tranche Notional Amount Credit Default Swap with Barclays Bank plc Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 4/24/2008 RFC CDO IV Ltd. Class Description: Class A-2 Senior Secured Floating Rate Notes Due July 15, 2051 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 6/3/2008 Class Description: Class A-3 Senior Secured Floating Rate Notes Due July 15, 2051 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 6/3/2008 Class Description: Class B Senior Secured Floating Rate Notes Due July 15, 2051 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/3/2008 Class Description: Super Senior Facility Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 6/3/2008 Baldwin 2006-I Segregated Portfolio Class Description: U.S.$35,000,000 Variable Floating Rate Notes Due 2046 Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 7/29/2008 Baldwin 2006-II Segregated Portfolio Class Description: U.S.$25,500,000 Variable Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 7/29/2008 Baldwin 2006-III Segregated Portfolio Class Description: U.S.$18,000,000 Variable Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 7/29/2008 Baldwin 2006-IV Segregated Portfolio Class Description: U.S.$51,000,000 Variable Floating Rate Notes Due 2038 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 7/29/2008 Credit Derivative Transaction Ref. No. NWGOC Class Description: Credit Default Swap Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/24/2008 Lincoln Avenue ABS CDO, Ltd. Class Description: Class A-1 Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: Class A-2 Current Rating: C Prior Rating: Ca Prior Rating Date: 5/30/2008 Class Description: Class B Current Rating: C Prior Rating: Ca Prior Rating Date: 5/30/2008 Millstone III CDO, Ltd. Class Description: U.S.$2,000,000,000 Class A-1A Floating Rate Term Notes Due 2046 Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S.$71,500,000 Class A-1B Floating Rate Delayed Draw Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S.$70,000,000 Class A-2 Floating Rate Notes Due 2046 Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/30/2008 Jupiter High-Grade CDO IV, Ltd. Class Description: A-1A Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 6/2/2008 Class Description: A-1B Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 6/2/2008 Lexington Capital Funding II, Ltd. Class Description: U.S.$385,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes Due 2046 Current Rating: B3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 5/8/2008 Class Description: U.S.$17,050,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/8/2008 Tricadia CDO 2006-6, Ltd. Class Description: Class A-1LA Current Rating: Aa2, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 6/29/2006 Class Description: Class X Current Rating: Aaa, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 6/29/2006 Class Description: Class A-1LB Current Rating: Aa3, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 6/29/2006 Class Description: Class A-2L Current Rating: A1, under review for possible downgrade Prior Rating: Aa1 Prior Rating Date: 6/29/2006 Class Description: Class A-3L Current Rating: Baa1, under review for possible downgrade Prior Rating: A1 Prior Rating Date: 6/29/2006 Class Description: Class B-1L Current Rating: Ba1, under review for possible downgrade Prior Rating: Baa1 Prior Rating Date: 6/29/2006 Class Description: Class B-2L Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 11/5/2007 Ipswich Street CDO, Ltd. Class Description: U.S. $1,530,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: U.S. $60,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Current Rating: Ca Prior Rating: B2, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: U.S. $62,000,000 Class B Third Priority Senior Secured Floating Rate Notes Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 4/24/2008 Harp High Grade CDO I, Ltd. Class Description: Class A-1 Notes Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 8/14/2008 UBS CDS Ref. #37395430 Class Description: First Loss Tranche Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 9/29/2008 AVANTI Funding 2006-1, Ltd. Class Description: U.S.$279,000,000 Class A-1 Floating Rate Senior Secured Notes due 2046 Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/29/2008 STRATA TRUST, SERIES 2006-13 Class Description: $79,000,000 Floating Rate Notes Due June 21, 2011 Current Rating: Baa2, under review for possible downgrade Prior Rating: A2 Prior Rating Date: 7/1/2008 Vertical ABS CDO 2006-2, Ltd. Class Description: Class A-S1VF Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: Class A1 Current Rating: Ca Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: Class A2 Current Rating: Ca Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/9/2008 Parkridge Lane Structured Finance Special Opportunities CDO I, Ltd. Class Description: A1 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 10/8/2008 Class Description: A2 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 10/8/2008 Tricadia CDO 2006-5, Ltd. Class Description: Class B Current Rating: A3, under review for possible downgrade Prior Rating: Aa3, under review for possible downgrade Prior Rating Date: 10/1/2008 Class Description: Class C Current Rating: Baa3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 10/1/2008 Class Description: Class D Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/1/2008 Montauk Point CDO II, Ltd. Class Description: Class A-1S Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class A-1J Current Rating: Ca Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 4/24/2008 C-BASS CBO XVI Ltd. Class Description: Class A Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/23/2008 Diversey Harbor ABS CDO, Ltd. Class Description: U.S.$1,250,000,000 Class A-1M Floating Rate Senior Secured Notes due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 10/23/2008 Class Description: U.S.$675,000,000 Class A-1Q Floating Rate Senior Secured Notes due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 10/23/2008 Orion 2006-1 Ltd. Class Description: Senior Swap Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/9/2008 Libertas Preferred Funding I, Ltd. Class Description: Class A-1 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 6/9/2008 Class Description: Class A-2 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 6/9/2008 Mercury CDO III, Ltd. Class Description: U.S.$900,000,000 Class A-1 First Priority Delayed Draw Senior Secured Floating Rate Notes Due 2048 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/9/2008 Vertical ABS CDO 2006-1 Class Description: A-S1VF Current Rating: B2, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 4/22/2008 Class Description: A1 Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 4/22/2008 Class Description: A2 Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 4/22/2008 Belle Haven ABS CDO 2006-1, Ltd. Class Description: Class A-1 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 9/23/2008 Mount Skylight CDO Ltd. Class Description: $890,000,000 Class A-1 Floating Rate Notes Due November 3, 2046 Current Rating: Caa1, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 7/7/2008 Class Description: $51,500,000 Class A-2 Floating Rate Notes Due November 3, 2046 Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 7/7/2008 Class Description: $30,000,000 Class B Floating Rate Notes Due November 3, 2046 Current Rating: Ca Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 7/7/2008 Class Description: $14,000,000 Class C Deferrable Interest Floating Rate Notes Due November 3, 2046 Current Rating: C Prior Rating: Ca Prior Rating Date: 7/7/2008 Class V Funding II, Ltd. Class Description: Class A-1 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 5/29/2008 Gemstone CDO V Ltd. Class Description: U.S.$243,800,000 Class A-1 Floating Rate Notes Due September 2046 Current Rating: Baa2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 4/23/2008 Class Description: U.S.$152,200,000 Class A-2 Floating Rate Notes Due September 2046 Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 4/23/2008 Class Description: U.S. $61,000,000 Class A-3 Floating Rate Notes Due September 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 4/23/2008 Class Description: U.S. $50,000,000 Class A-4 Floating Rate Notes Due September 2046 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 4/23/2008 Eirles Two Limited Series 242 Class Description: Class B Current Rating: Caa3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 5/18/2008 Eirles Two Limited Series 243 Class Description: Class B Current Rating: Caa3, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/20/2008 Eirles Two Limited Series 244 Class Description: Class B Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/20/2008 Eirles Two Limited Series 245 Class Description: Class B Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/18/2008 Eirles Two Limited Series 247 Class Description: Class B Current Rating: Caa3, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/20/2008 Broadwick Funding, Ltd. Class Description: Class S Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 10/23/2008 Madaket Funding I, Ltd. Class Description: US$500,000,000 Class A1M Floating Rate Notes Due 2046 Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 10/17/2008 Class Description: US$300,000,000 Class A1Q Floating Rate Notes Due 2046 Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 10/17/2008 Magnolia II 2006-6 Class Description: Series 2006-6B ABS Portfolio Variable Rate Notes Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 10/1/2008 Class Description: Series 2006-6C ABS Portfolio Variable Rate Notes Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 10/1/2008 Class Description: Series 2006-6D ABS Portfolio Variable Rate Notes Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 10/1/2008 Class Description: Series 2006-6E ABS Portfolio Variable Rate Notes Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 10/1/2008 SLSpoke 2006-1 Class Description: U.S.$30,000,000 Variable Floating Rate Notes Due 2041 Current Rating: Baa1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 8/4/2008 ABSpoke 2006-III C Class Description: U.S.$30,000,000 Variable Floating Rate Notes Due 2045 Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 4/24/2008 ABSpoke 2006-IIIA Class Description: U.S.$20,000,000 Variable Floating Rate Notes Due 2045 Current Rating: Caa3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 4/24/2008 ABSpoke 2006-IIIB Class Description: U.S.$30,000,000 Variable Floating Rate Notes Due 2045 Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/24/2008 Kent Funding II, Ltd. Class Description: Class A-1A Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 9/2/2008 ARLO VI Limited Series 2006 (Zander I) Class Description: Zander I Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/9/2008 ARLO VI Limited Series 2006 (Zander III) Class Description: U.S. $19,000,000 Variable Secured Limited Recourse Credit-Linked Notes due May 3, 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/9/2008 Citius I Funding, Ltd. Class Description: Class A ST Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/23/2008 Class Description: Class A LT Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/23/2008 Class Description: Class A-1 Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 4/23/2008 Hout Bay 2006-1 Ltd. Class Description: Class S Notes Current Rating: Aaa, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 5/16/2006 Class Description: Class A-1 Notes Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/23/2008 ABACUS 2006-12, LTD. Class Description: U.S. $95,000,000 Class A-1 Floating Rate Notes, Due 2038 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/30/2008 Toro ABS CDO II, Ltd. Class Description: U.S.$885,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes Due June 2043 Current Rating: Caa2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 7/9/2008 WEST TRADE FUNDING CDO I LTD. Class Description: U.S.$1,350,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes due June 2044 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/30/2008 Fox Trot CDO Ltd. Class Description: Class A Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/1/2008 Class Description: Class B Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/1/2008 ABSpoke 2006-IIC Class Description: U.S.$15,000,000 Variable Floating Rate Notes Due 2037 Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 4/24/2008 Duke Funding X Ltd Class Description: Senior Swap Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 5/1/2008 Class Description: Class A1 Senior Secured Floating Rate Notes Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/1/2008 Class Description: Class A2 Senior Secured Floating Rate Notes Current Rating: Ca Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/1/2008 Static Residential CDO 2006-A Ltd. Class Description: Class A-1(a) Floating Rate Notes Current Rating: B1, under review for possible downgrade Prior Rating: Baa1, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class A-1(b) Floating Rate Notes Current Rating: B3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class A-2 Floating Rate Notes Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class B Floating Rate Notes Current Rating: Caa2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class C Deferrable Interest Floating Rate Notes Current Rating: Ca Prior Rating: B2, under review for possible downgrade Prior Rating Date: 4/24/2008 G Square Finance 2006-1 Ltd Class Description: Class X Senior Secured Floating Rate Notes due 2051 Current Rating: Aaa, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 3/31/2006 Class Description: Class A-1 Senior Secured Floating Rate Notes due 2051 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 10/23/2008 Magnolia Finance II plc., Series 2006-5 Class Description: Series 2006-5A Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 4/30/2008 Magnolia Finance II plc., Series 2006-5 Class Description: Series 2006-5B Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 4/30/2008 Bernoulli High Grade CDO I, Ltd. Class Description: Class A1-A First Priority Senior Secured Floating Rate Notes Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/27/2008 Class Description: Class A-1B First Priority Senior Secured Floating Rate Notes Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 10/27/2008 Davis Square Funding VI, Ltd. Class Description: U.S. $274,000,000 Class A-1LT-a Floating Rate Notes Due 2041 Current Rating: Ba3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: U.S. $300,000,000 Class A-1LT-b Floating Rate Notes Due 2041 Current Rating: Ba3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: up to U.S. $1,166,000,000 Class A-1LT-c Floating Rate Notes Due 2041 Current Rating: Ba3, under review for possible downgrade Prior Rating: A3, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: U.S. $85,000,000 Class A-2 Floating Rate Notes Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: U.S. $105,000,000 Class B Floating Rate Notes Due 2041 Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/9/2008 Monterey CDO, Ltd. Class Description: U.S.$240,000,000 Class A-1A First Priority Senior Secured Floating Rate Delayed Draw Notes Due September 2042 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/28/2008 Class Description: U.S.$560,000,000 Class A-1B First Priority Senior Secured Floating Rate Notes Due September 2042 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 10/28/2008 Tierra Alta Funding I, Ltd. Class Description: Class F Notes Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 10/28/2008 ZAIS Investment Grade Limited VIII Class Description: Class A-1 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 10/6/2008 ABACUS 2006-8, LTD. Class Description: U.S. $27,500,000 Class A-3 Floating Rate Notes, Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S. $20,000,000 Class B Floating Rate Notes, Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S. $50,000,000 Class A-1 Floating Rate Notes, Due 2045 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S. $35,000,000 Class A-2 Floating Rate Notes, Due 2045 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/30/2008 Lancer Funding, Ltd. Class Description: Class A-1S1 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 10/17/2008 Acacia CDO 9, Ltd. Class Description: Class A First Priority Senior Secured Floating Rate Notes Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 10/28/2008 Class Description: Class B Second Priority Senior Secured Floating Rate Notes Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 10/28/2008 Connecticut Valley Structured Credit CDO III, Ltd. Class Description: Class A-2 Current Rating: Aa3, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 3/31/2006 Class Description: Class A-3A Current Rating: A2, under review for possible downgrade Prior Rating: Aa2 Prior Rating Date: 3/31/2006 Class Description: Class A-3B Current Rating: A2, under review for possible downgrade Prior Rating: Aa2 Prior Rating Date: 3/31/2006 Class Description: Class B-1 Current Rating: Baa2, under review for possible downgrade Prior Rating: A2 Prior Rating Date: 3/31/2006 Class Description: Class B-2 Current Rating: Baa2, under review for possible downgrade Prior Rating: A2 Prior Rating Date: 3/31/2006 Class Description: Class C-1 Current Rating: Ba2, under review for possible downgrade Prior Rating: Baa2 Prior Rating Date: 3/31/2006 Class Description: Class C-2 Current Rating: Ba2, under review for possible downgrade Prior Rating: Baa2 Prior Rating Date: 3/31/2006 Class Description: Class A-1 Current Rating: Aa2, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 3/31/2006 Class Description: Class Q Current Rating: A2, under review for possible downgrade Prior Rating: Aa2 Prior Rating Date: 3/31/2006 Ischus Synthetic ABS CDO 2006-1, Ltd. Class Description: Senior Swap Current Rating: Baa2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 7/3/2008 Class Description: Class X Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 7/3/2008 Class Description: Class A-1LB Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 7/3/2008 Neptune CDO III, Ltd. Class Description: Class S Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 10/6/2008 Orchid Structured Finance CDO III, Ltd. Class Description: U.S.$350,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes Due 2046 Current Rating: Caa3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: U.S.$65,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due 2046 Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/30/2008 Fortius I Funding Ltd Class Description: U.S.$ 11,500,000 Class S Floating Rate Notes Due 2010 Current Rating: Aaa, under review for possible downgrade Prior Rating: Aaa Prior Rating Date: 3/28/2006 Class Description: U.S.$ 390,000,000 Class A-1 Floating Rate Note Due 2041 Current Rating: Ba3, under review for possible downgrade Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 10/23/2008 Class Description: U.S.$ 84,000,000 Class A-2 Floating Rate Notes Due 2041 Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 10/23/2008 Long Hill 2006-1 CDO, Ltd Class Description: Class A-S1VF Notes Current Rating: Baa2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 3/26/2008 Class Description: Class A-S2T Notes Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: Class A1 Notes Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: Class A2 Notes Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/9/2008 Ischus High Grade Funding I, Ltd. Class Description: Class A1S Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 10/20/2008 ABSpoke 2006-IA Class Description: U.S.$100,000,000 Variable Floating Rate Notes Due 2046 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/23/2008 North Cove CDO II, Ltd. Class Description: Class A Current Rating: B3, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 5/23/2008 Class Description: Class B Current Rating: Caa2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 5/23/2008 Class Description: Class C Current Rating: Ca Prior Rating: B2, under review for possible downgrade Prior Rating Date: 5/23/2008 Class Description: Class D Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/23/2008 Class Description: Class E Current Rating: Ca Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/23/2008 BFC Genesee CDO Ltd. Class Description: Class A-1LA Current Rating: Caa3, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/29/2008 Class Description: Class A-1LB Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/29/2008 Millerton II High Grade ABS CDO, Ltd. Class Description: U.S.$1,118,000,000 Class A-1 Senior Secured Floating Rate Notes Due 2051 Current Rating: Ba2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 6/4/2008 Class Description: U.S.$91,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2051 Current Rating: Caa3, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 6/4/2008 Class Description: U.S.$46,500,000 Class B Senior Secured Floating Rate Notes Due 2051 Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 6/4/2008 Montauk Point CDO, Ltd. Class Description: Class A-1 First Priority Senior Secured Floating Rate Notes Current Rating: Caa1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: Class A-2 Second Priority Senior Secured Floating Rate Notes Current Rating: Ca Prior Rating: B3, under review for possible downgrade Prior Rating Date: 5/30/2008 Class Description: Class B Third Priority Senior Secured Floating Rate Notes Current Rating: Ca Prior Rating: Caa2, under review for possible downgrade Prior Rating Date: 5/30/2008 C-BASS CBO XV Ltd. Class Description: U.S.$565,800,000 Class A First Priority Senior Secured Floating Rate Notes Due 2041-1 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 5/16/2008 Class Description: U.S.$39,100,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 5/16/2008 Bayberry Funding, Ltd. Class Description: Class II Senior Floating Rate Notes Current Rating: C Prior Rating: B3, under review for possible downgrade Prior Rating Date: 9/25/2008 Class Description: Class III Senior Floating Rate Notes Current Rating: C Prior Rating: Ca Prior Rating Date: 9/25/2008 Burnham Harbor CDO 2006-1 Class Description: Class A-1Lb Current Rating: Ba2, under review for possible downgrade Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 4/29/2008 Class Description: Class A-2L Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/29/2008 Class Description: Class A-3L Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 4/29/2008 Class Description: Class B-1L Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 4/29/2008 Longshore CDO Funding 2006-1 Ltd. Class Description: Class A-1 Current Rating: Ba1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 6/4/2008 Class Description: Class A-2 Current Rating: Caa3, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 6/4/2008 South Coast Funding VIII, Ltd Class Description: Class A-1V Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 6/2/2008 Class Description: Class A-1NV Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 6/2/2008 Class Description: Class A-2 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 6/2/2008 Gemstone CDO IV Ltd. Class Description: Class A-1 Floating Rate Notes Due February 2041 Current Rating: Caa3, under review for possible downgrade Prior Rating: Caa1, under review for possible downgrade Prior Rating Date: 10/1/2008 RFC CDO III Ltd. Class Description: Class A-1 Investor Swap Current Rating: Baa2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 10/1/2008 STAtic ResidenTial CDO 2005-C Class Description: Class A-1 Current Rating: Ba1, under review for possible downgrade Prior Rating: A1, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class A-2 Current Rating: Caa3, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class B Current Rating: Ca Prior Rating: A3, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class C Current Rating: Ca Prior Rating: Baa2, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class D Current Rating: Ca Prior Rating: Baa3, under review for possible downgrade Prior Rating Date: 4/24/2008 Class Description: Class E Current Rating: Ca Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 4/24/2008 ABSpoke 2005-XII B Class Description: Variable Floating Rate Notes Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 4/23/2008 Opus CDO I Ltd. Class Description: Super Senior Swap Current Rating: A2, under review for possible downgrade Prior Rating: Aa2, under review for possible downgrade Prior Rating Date: 6/9/2008 Class Description: Class A Senior Senior Floating Rate Notes Due 2050-1 Current Rating: Ba1, under review for possible downgrade Prior Rating: Baa1, under review for possible downgrade Prior Rating Date: 6/9/2008 Class Description: Class B Senior Senior Floating Rate Notes Due 2050 Current Rating: B1, under review for possible downgrade Prior Rating: Ba1, under review for possible downgrade Prior Rating Date: 6/9/2008 Class Description: Class C Mezzanine Floating Rate Deferrable Notes Due 2050 Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 6/9/2008 Class Description: Combination Notes Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 6/9/2008 TOPANGA CDO, LTD. Class Description: U.S.$49,000,000 Class A-1 Floating Rate Senior Secured Notes Due 2045 Current Rating: B2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 5/9/2008 Class Description: U.S.$37,000,000 Class A-2 Floating Rate Senior Secured Notes Due 2045 Current Rating: Caa1, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 5/9/2008 GSC ABS CDO 2005-1, Ltd. Class Description: Senior Swap Current Rating: Caa2, under review for possible downgrade Prior Rating: B2, under review for possible downgrade Prior Rating Date: 10/9/2008 KLEROS PREFERRED FUNDING II, LTD. Class Description: U.S.$250,000 Class A-1V First Priority Senior Secured Voting Floating Rate Notes Due December 2042 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 10/20/2008 Class Description: U.S.$869,750,000 Class A-1NV First Priority Senior Secured Non-Voting Floating Rate Notes Due December 2042 Current Rating: B3, under review for possible downgrade Prior Rating: Ba3, under review for possible downgrade Prior Rating Date: 10/20/2008 Duke Funding High Grade IV, Ltd. Class Description: Class A-1 Current Rating: Ba2, under review for possible downgrade Prior Rating: A2, under review for possible downgrade Prior Rating Date: 7/21/2008 Class Description: Class A-2 Current Rating: Caa2, under review for possible downgrade Prior Rating: Ba2, under review for possible downgrade Prior Rating Date: 7/21/2008 Class Description: Class B-1 Current Rating: Caa3, under review for possible downgrade Prior Rating: B1, under review for possible downgrade Prior Rating Date: 7/21/2008 Class Description: Class B-2 Current Rating: Ca Prior Rating: B2, under review for possible downgrade Prior Rating Date: 7/21/2008 * Moody's: Likely Scenario for Big 3 Is Major Government Support ---------------------------------------------------------------- The U.S. Government will likely provide immediate stopgap financing to bridge the major American auto companies until a more complete agreement can be reached early in 2009, says Moody's Investors Service in a new report that outlines the three mostly likely bailout and bankruptcy scenarios for government help to Ford, GM and Chrysler. "We think it's most likely that a prepackaged bankruptcy filing coupled with government financial assistance will be needed to restructure the Big Three," said Moody's Senior Vice President Bruce Clark, a co-author of the report. "The government will also probably offer support by providing or guaranteeing debtor-in- possession or DIP financing, and bondholder losses would probably be less than 75% in this scenario." In the wake of the domestic auto manufacturing companies' request for urgent financial assistance from the federal government, the Moody's report describes three bailout and bankruptcy scenarios for Detroit, assesses the probabilities of these scenarios, and examines the extent of likely losses in each of the scenarios for auto manufacturer debt holders. It then assesses the broader implications of the three scenarios, across the larger economy generally and specifically on 10 important financial and industrial sectors. These include auto-part manufacturers, captive finance companies, car rental companies, banks, auto dealers, steel, chemicals, rental car fleet securitizations, state and local governments, dealer floorplan securitizations, auto loan/lease securitizations, and rental car fleet securitizations. "A prepackaged bankruptcy might be the best approach to current problems, but achieving timely agreement from a broad range of creditors would be highly difficult, especially given the critical funding status of GM and Chrysler," said Mr. Clark. While the analyst and his Moody's colleagues give a prepackaged bankruptcy filing coupled with government financial assistance a 70% likelihood of coming to pass, they assign a 25% probability of a government bailout without a near-term automaker bankruptcy. "Under this less-likely scenario, a comprehensive bailout package is agreed to that enables the automakers to restructure without any bankruptcy filings during 2009. The degree of economic disruption and direct financial loss for investors would be contained, at least in the short term," said Mr. Clark. "Bondholder losses would be the least in this scenario, although there is a risk that such a reorganization would be inadequate, and that at least one automaker might file for bankruptcy beyond 2009." Given only a 5% likelihood, Moody's also considers the "freefall bankruptcy" scenario without a prepackage plan and without government involvement. This would involve the most significant disruption to the economy, including potential bankruptcies in associated industries such as auto parts suppliers and auto dealers. "The negative consumer sentiment and erosion of franchise value would make the reorganization process more complex for the automakers and a Chapter 7 liquidation of at least one of the automakers possible," said Mr. Clark. "Auto bondholder losses could be in the 75-100% range in this scenario." The report, "U.S. Automakers: Credit Implications of Three Scenarios Have Broad Reach," is available at: http://www/moodys.com/ * S&P Corrects Ratings Release to Show Right Debt Type for Venoco ----------------------------------------------------------------- Standard & Poor's Ratings Services said that, following an industry review of oil and gas exploration and production companies, it revised the outlook to stable from positive on a number of speculative-grade companies while affirming the ratings. "The review was prompted by our recent revision of our oil and gas pricing assumptions in light of the rapid decline in hydrocarbon prices and our expectation that lower prices will prevail for the near to medium term," S&P said. "We revised the outlook on Forest Oil Corp. ('BB-') to stable from positive because we expect worsening credit metrics. At our 2009 pricing assumptions, we expect debt to EBITDA to be roughly 3x, which well exceeds our published upgrade trigger of 2x. In addition to the lower pricing assumptions, Forest's debt is higher than we previously expected because the company has not been able to consummate anticipated asset sales. Liquidity should remain adequate in 2009. We expect Forest to lower its capital budget from the 2008 level to be in line with internally generated cash flows. "We revised the outlook on Whiting Petroleum Corp. ('BB-') to stable from positive. Although the company has reported significant production growth throughout 2008, primarily in the Bakken oil formation in the northern U.S.), positive rating momentum has stalled because of the lower price environment. Furthermore, Whiting is vulnerable to further price declines because of its minimal hedge position in 2009. We do highlight, though, that the company's liquidity position of about $400 million as of Sept. 30, 2008, and its significant covenant cushion are adequate for the rating "On Clayton Williams Energy Inc. ('B') we revised the outlook to stable from positive because of weaker credit measures, in light of our revised crude oil and natural gas price assumptions. Although near-term liquidity remains adequate, the outlook revision reflects our expectation that Clayton Williams will not be able to sustain its recent financial performance in the near term. We also expect Clayton's operating cash flows to weaken, given the company's "unhedged" position in 2009 and a relatively high cost structure. "The revision of the outlook on Venoco Inc. ('B') to stable from positive stems from falling commodity prices. This decline reduces our confidence that credit measures will improve materially in the near term. The company is selling or monetizing (through a volumetric production payment) its interest in the Hastings complex to Denbury Resources Inc. (BB/Stable/--), which will likely result in debt repayment and increase availability under the revolving credit facility. However, the lower price environment will probably reduce the proceeds. Ratings List Ratings Affirmed, Outlook Revised To From -- ---- Clayton Williams Energy Inc. Corporate credit rating B/Stable/-- B/Positive/-- Sr unsecd B+ B+ Recovery 2 2 Forest Oil Corp. Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sr unsecd B+ B+ Recovery 5 5 Venoco Inc. Corporate credit rating B/Stable/-- B/Positive/-- Sr secd B B Recovery 3 3 Whiting Petroleum Corp. Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sub debt BB- BB- Recovery 3 3 * S&P Cuts Ratings on 19 Classes of Certificates From 6 RMBS Deals ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 19 classes of pass-through certificates from six U.S. subprime residential mortgage-backed securities (RMBS) transactions issued between 2001 and 2004. "Concurrently, we affirmed our ratings on 41 other classes of certificates from these and eight additional deals," S&P said. According to S&P: "The lowered ratings reflect the deterioration of available credit support for the affected transactions, as well as our loss expectations based on the dollar amount of loans currently in the delinquency pipelines of the downgraded transactions. Because the remaining pool balances for transactions with lowered ratings are becoming smaller, the potential losses from delinquent loans could have a more significant impact on the credit support available for the remaining classes. As of the October 2008 remittance period, the average pool balance for the affected transactions was 9.04% of the original pool balance. Based on the current collateral performance of these transactions, we believe that future credit enhancement percentages will be insufficient to maintain the ratings at their previous levels. As of the October 2008 remittance report, current credit support versus severe delinquencies for the six affected deals were: Argent Securities Inc. Series Class Credit support (mil. $) Sev. del. (mil. $) ------ ----- ----------------------- ------------------ 2003-W2 M-6 2.296 5.634 Argent Securities Inc. Series Class Credit support (mil. $) Sev. del. (mil. $) ------ ----- ----------------------- ------------------ 2003-W9 M-2 32.118 23.389 2003-W9 M-3 30.919 23.389 2003-W9 M-3B 30.919 23.389 2003-W9 M-4B 22.145 23.389 2003-W9 M-5 16.182 23.389 2003-W9 M-6 10.235 23.389 CDC Mortgage Capital Trust 2004-HE2 Series Class Credit support (mil. $) Sev. del. (mil. $) ------ ----- ----------------------- ------------------ 2004-HE2 M-1 18.154 14.093 2004-HE2 M-2 8.139 14.093 2004-HE2 M-3 6.221 14.093 2004-HE2 B-1 4.167 14.093 2004-HE2 B-2 2.362 14.093 Merrill Lynch Mortgage Investors Trust Series 2004-FM1 Series Class Credit support (mil. $) Sev. del. (mil. $) ------ ----- ----------------------- ------------------ 2004-FM1 B-4 1.868 16.320 RASC Series 2001-KS3 Trust Series Class Credit support (mil. $) Sev. del. (mil. $) ------ ----- ----------------------- ------------------ 2001-KS3 M-I-1 9.567 11.942 2001-KS3 M-I-2 4.551 11.942 2001-KS3 M-II-1 7.274 10.488 2001-KS3 M-II-2 5.584 10.488 2001-KS3 M-II-3 5.101 10.488 Renaissance Home Equity Loan Trust 2002-3 Series Class Credit support (mil. $) Sev. del. (mil. $) ------ ----- ----------------------- ------------------ 2002-3 M-2 3.541 4.902 "As of the Oct. 25, 2008 distribution date, cumulative losses for the downgraded transactions ranged from 1.32% to 5.75% of the original pool balances. Total delinquencies ranged from 16.52% to 30.31% of the current pool balances, while severe delinquencies (90-plus days, foreclosures, and real estate owned {REO}) ranged from 12.38% to 22.40% of the current pool balances. "The affirmations reflect current and projected credit support percentages that are sufficient to maintain the ratings at their current levels. As of the October 2008 remittance report, credit support for these classes ranged from 7.43% to 84.24% of the current pool balances. In comparison, the ratio of current credit enhancement to original enhancement ranged from 0.52x to 4.22x. "A combination of subordination, excess interest, and overcollateralization provide credit enhancement for these transactions. The collateral supporting these series originally consisted of pools of U.S. subprime fixed- and adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties." RATING ACTIONS Argent Securities Inc. Series 2003-W2 Rating Class CUSIP To From ----- ----- -- ---- M-6 040104AV3 CCC B Argent Securities Inc. Series 2003-W9 Rating Class CUSIP To From ----- ----- -- ---- M-2 040104EB3 A AA M-3 040104ED9 A AA- M-3B 040104EF4 BBB AA- M-4B 040104EH0 B A M-5 040104EJ6 B- BB+ M-6 040104EK3 CCC B CDC Mortgage Capital Trust 2004-HE2 Series 2004-HE2 Rating Class CUSIP To From ----- ----- -- ---- M-1 12506YCW7 BBB AA M-2 12506YCX5 CCC BB M-3 12506YCY3 CCC B+ B-1 12506YCZ0 CC B B-2 12506YDA4 CC B- Merrill Lynch Mortgage Investors Trust Series 2004-FM1 Series 2004-FM1 Rating Class CUSIP To From ----- ----- -- ---- B-4 59020UGB5 CCC BB RASC Series 2001-KS3 Trust Series 2001-KS3 Rating Class CUSIP To From ----- ----- -- ---- M-I-1 76110WMF0 BBB- AA M-I-2 76110WMG8 B BB M-II-1 76110WMJ2 B BB M-II-2 76110WMK9 CCC B M-II-3 76110WML7 CCC B Renaissance Home Equity Loan Trust 2002-3 Series 2002-3 Rating Class CUSIP To From ----- ----- -- ---- M-2 75970NAC1 BB A RATINGS AFFIRMED American General Mortgage Loan Trust 2003-1 Series 2003-1 Class CUSIP Rating ----- ----- ------ A-3 02639MAC0 AAA M-1 02639MAD8 AA M-2 02639MAE6 A Argent Securities Inc. Series 2003-W1 Class CUSIP Rating ----- ----- ------ M-2 040104AD3 A M-3 040104AE1 A- M-4 040104AF8 BBB+ M-5 040104AG6 BBB MV-6 040104AH4 BB- MF-6 040104AM3 BB- Argent Securities Inc. Series 2003-W2 Class CUSIP Rating ----- ----- ------ M-2 040104AU5 A M-3 040104AN1 A- M-4 040104AP6 BBB+ M-5 040104AQ4 BBB Argent Securities Inc. Series 2003-W9 Class CUSIP Rating ----- ----- ------ M-1 040104EA5 AAA ContiMortgage Home Equity Loan Trust 1999-2 Series 1999-2 Class CUSIP Rating ----- ----- ------ A-6 21075WKJ3 AA A-7 21075WKK0 AA A-8 21075WKL8 AA Merrill Lynch Mortgage Investors Trust Series 2004-FM1 Series 2004-FM1 Class CUSIP Rating ----- ----- ------ M-2 59020UFW0 AA M-3 59020UFX8 A+ B-1 59020UFY6 A B-2 59020UFZ3 BBB+ B-3 59020UGA7 BBB RASC Series 2001-KS3 Trust Series 2001-KS3 Class CUSIP Rating ----- ----- ------ A-I-5 76110WMB9 AAA A-I-6 76110WMC7 AAA A-II 76110WME3 AAA RASC Series 2002-KS1 Trust Series 2002-KS1 Class CUSIP Rating ----- ----- ------ A-I-5 76110WMW3 A A-I-6 76110WMX1 A A-IIA 76110WMY9 A A-IIB 76110WMZ6 A RASC Series 2002-KS6 Trust Series 2002-KS6 Class CUSIP Rating ----- ----- ------ A-I-5 749248AF7 A A-I-6 749248AG5 A RASC Series 2003-KS5 Trust Series 2003-KS5 Class CUSIP Rating ----- ----- ------ A-II-A 76110WSJ6 A A-II-B 76110WSK3 A RASC Series 2004-KS4 Trust Series 2004-KS4 Class CUSIP Rating ----- ----- ------ A-II-A 76110WXT8 A A-II-B3 76110WXW1 A Renaissance Home Equity Loan Trust 2002-3 Series 2002-3 Class CUSIP Rating ----- ----- ------ A 75970NAA5 AAA M-1 75970NAB3 AA Structured Asset Securities Corp. Series 2003-BC2 Class CUSIP Rating ----- ----- ------ M1 86359APY3 AA M2 86359APZ0 A M3 86359AQA4 B M4 86359AQB2 CCC * S&P Lowers Ratings on 99 Classes From 7 U.S. RMBS Transactions ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 99 classes from seven U.S. Alternative-A (Alt-A) residential mortgage-backed securities (RMBS) transactions issued in 2005 and 2007. "We removed five of the lowered ratings from CreditWatch with negative implications. Additionally, we affirmed our ratings on 33 classes from four of the same transactions," S&P said. "The original balances and lifetime expected losses for the transactions, or applicable structure groups, we reviewed are: Orig. bal. Lifetime Transaction (mil. $) exp loss(%) ----------- ---------- ----------- Bear Stearns ALT-A Tr 2005-8 (Structure 1) 1,076 9.08 Bear Stearns ALT-A Tr 2005-8 (Structure 2) 781 5.73 Bear Stearns Asset Backed Sec I Tr 2005-AC8 380 6.94 CSFB Mortgage-Backed Tr 2005-10 (Structure D-B) 622 5.85 CSFB Mortgage-Backed Tr 2005-11 (Structure D-B) 319 6.05 MASTR Alternative Loan Tr 2005-1 (Structure B-1) 231 0.75 MASTR Alternative Loan Tr 2005-1 (Structure B) 277 1.35 Merrill Lynch Alternative Note Asset Tr 2007-A2 881 18.62 Merrill Lynch Alternative Note Asset Tr 2007-A3 488 20.68 "The downgrades, affirmations, and CreditWatch resolutions incorporate projected losses based on the dollar amounts of loans currently in the transactions' or structures' delinquency, foreclosure, and real estate owned (REO) pipelines. We also incorporated cumulative losses to date in our analysis when determining ratings outcomes. The lowered ratings reflect our belief that the amount of credit enhancement available for the downgraded classes is not sufficient to cover losses at the previous rating levels. Although cumulative losses were generally low in comparison to our projected lifetime losses for the transactions reviewed, we are projecting an increase in losses due to upward trends in delinquencies and the current condition of the housing market. The affirmations reflect sufficient credit enhancement to support the ratings at their current levels. Certain senior classes also benefit from senior support classes that would provide support to a certain extent before any applicable losses could affect the super-senior certificates. The subordination of more-junior classes within each structure provides credit support for the affected transactions. Additionally, some of the structures use overcollateralization and excess interest to absorb losses and accelerate payments to certain security holders. The collateral backing the affected trusts originally consisted predominantly of Alt-A first-lien, fixed-rate or adjustable-rate residential mortgage loans secured by one- to four-family properties. "We monitor these transactions over time to incorporate updated losses and delinquency pipeline performance to determine whether the applicable credit enhancement features are sufficient to support the current ratings. We will continue to monitor these transactions and take additional rating actions as appropriate." RATING ACTIONS Bear Stearns ALT-A Trust 2005-8 Series 2005-8 Rating Class CUSIP To From ----- ----- -- ---- I-1A-2 07386HWS6 AA AAA I-2A-2 07386HWU1 AA AAA I-M-1 07386HWV9 CCC AA I-M-2 07386HWW7 CCC A I-B-1 07386HWX5 CC BBB I-B-2 07386HWY3 CC BBB- I-B-3 07386HXE6 D BB II-B-1 07386HXA4 B AA+ II-B-2 07386HXB2 CCC AA II-B-3 07386HXC0 CCC A II-B-4 07386HXD8 CC BBB II-B-5 07386HXK2 D B Bear Stearns Asset Backed Securities I Trust 2005-AC8 Series 2005-AC8 Rating Class CUSIP To From ----- ----- -- ---- A-1 073879Z27 AA AAA A-2 073879Z35 AA AAA A-3 073879Z43 AA AAA A-4 073879Z50 AA AAA A-5 073879Z68 AA AAA A-6 073879Z76 AA AAA A-7 073879Z84 AA AAA A-8 073879Z92 AA AAA A-9 0738792N7 AA AAA A-10 0738792P2 AA AAA X-1 0738792A5 AA AAA PO 0738792B3 AA AAA B-1 0738792C1 CCC AA B-2 0738792D9 CCC BBB B-3 0738792E7 CC B B-4 0738792J6 D CCC CSFB Mortgage-Backed Trust Series 2005-10 Series 2005-10 Rating Class CUSIP To From ----- ----- -- ---- III-A-1 225470DW0 AA AAA III-A-2 225470DX8 BB AAA III-A-3 225470DY6 B+ AAA III-A-4 225470DZ3 B+ AAA IV-A-1 225470EA7 BB AAA IV-A-2 225470EB5 B+ AAA V-A-1 225470EC3 B+ AAA V-A-2 225470ED1 B+ AAA V-A-3 225470EE9 B+ AAA V-A-4 225470EF6 BB AAA V-A-5 225470EG4 B+ AAA V-A-6 225470EH2 B+ AAA V-A-7 225470EJ8 B+ AAA D-B-1 225470GB3 CCC AA D-B-2 225470GC1 CCC BBB D-B-3 225470GD9 CC BB D-B-4 225470GE7 D B D-B-5 225470GQ0 D CCC V-A-8 225470EK5 B+ AAA V-A-9 225470EL3 B+ AAA V-A-10 225470EM1 B+ AAA VIII-A-1 225470FE8 B+ AAA VIII-A-2 225470FF5 B+ AAA VIII-A-3 225470FG3 BB AAA VIII-A-4 225470FH1 B+ AAA IX-A-1 225470FJ7 B+ AAA X-A-1 225470FK4 B+ AAA X-A-2 225470FL2 B+ AAA X-A-3 225470FM0 BB AAA X-A-4 225470FN8 B+ AAA X-A-5 225470FP3 B+ AAA D-X-1 225470FU2 AA AAA D-X-2 225470FV0 BB AAA A-P2 225470FW8 B+ AAA CSFB Mortgage-Backed Trust Series 2005-11 Series 2005-11 Rating Class CUSIP To From ----- ----- -- ---- 1-A-1 2254W0NE1 BBB AAA 2-A-1 2254W0NF8 BBB AAA 3-A-1 2254W0NG6 BBB AAA 3-A-2 2254W0NH4 BBB AAA 3-A-3 2254W0NJ0 BBB AAA 3-A-4 2254W0NK7 BBB AAA 3-A-5 2254W0NL5 BBB AAA 3-A-6 2254W0NM3 AA AAA 3-A-7 2254W0NN1 BBB AAA 4-A-1 2254W0NP6 A AAA 7-A-1 2254W0PC3 AA AAA 7-A-2 2254W0PD1 BBB AAA D-X 2254W0PR0 AA AAA A-P 2254W0PT6 BBB AAA D-B-1 2254W0PX7 CCC AA/Watch Neg D-B-2 2254W0PY5 CCC A/Watch Neg D-B-3 2254W0PZ2 CC BBB-/Watch Neg D-B-4 2254W0QC2 CC BB-/Watch Neg D-B-5 2254W0QG3 D B/Watch Neg D-B-6 2254W0QH1 D CCC D-B-7 2254W0QJ7 D CCC MASTR Alternative Loan Trust 2005-1 Series 2005-1 Rating Class CUSIP To From ----- ----- -- ---- B-3 576434G40 CCC BBB Merrill Lynch Alternative Note Asset Trust Series 2007-A2 Series 2007-A2 Rating Class CUSIP To From ----- ----- -- ---- A-2A 59024FAB0 B BBB A-3A 59024FAD6 BB BBB A-3B 59024FAE4 B+ BBB A-3C 59024FAF1 B+ BBB M-2 59024FAJ3 CC CCC B-2 59024FAQ7 D CC B-3 59024FAR5 D CC Merrill Lynch Alternative Note Asset Trust Series 2007-A3 Series 2007-A3 Rating Class CUSIP To From ----- ----- -- ---- A-2A 59024HAB6 BB BBB A-2B 59024HAC4 B+ BBB A-2C 59024HAD2 B+ BBB M-2 59024HAG5 CC CCC M-3 59024HAH3 CC CCC B-1 59024HAM2 D CC B-2 59024HAN0 D CC B-3 59024HAP5 D CC RATINGS AFFIRMED Bear Stearns ALT-A Trust 2005-8 Series 2005-8 Class CUSIP Rating ----- ----- ------ I-1A-1 07386HWR8 AAA I-2A-1 07386HWT4 AAA II-1A-1 07386HWZ0 AAA MASTR Alternative Loan Trust 2005-1 Series 2005-1 Class CUSIP Rating ----- ----- ------ 1-A-1 576434D76 AAA 2-A-1 576434D84 AAA 3-A-1 576434D92 AAA 4-A-1 576434E26 AAA 5-A-1 576434E34 AAA 30-X-2 576434F66 AAA 15-A-X 576434F74 AAA 15-PO 576434F82 AAA 30-PO 576434F90 AAA B-I-1 576434G57 AA- B-I-2 576434G65 A- B-I-5 576434H49 B 6-A-1 576434E42 AAA 6-A-2 576434E59 AAA 6-A-3 576434E67 AAA 6-A-4 576434E75 AAA 6-A-5 576434E83 AAA 7-A-1 576434E91 AAA 7-A-2 576434F25 AAA 30-X-1 576434F58 AAA B-1 576434G24 AA B-2 576434G32 A B-4 576434G81 CCC Merrill Lynch Alternative Note Asset Trust Series 2007-A2 Series 2007-A2 Class CUSIP Rating ----- ----- ------ A-1 59024FAA2 B A-2B 59024FAC8 B A-3D 59024FAG9 B M-1 59024FAH7 CCC Merrill Lynch Alternative Note Asset Trust Series 2007-A3 Series 2007-A3 Class CUSIP Rating ----- ----- ------ A-1 59024HAA8 B A-2D 59024HAE0 B M-1 59024HAF7 CCC * S&P Junks Two Classes of EURO-Denominated Notes ------------------------------------------------- Standard & Poor's Ratings Services took these rating actions on seven collateralized fund obligation transactions: -- lowered three ratings and placed them on CreditWatch with negative implications; -- lowered two ratings and removed them from CreditWatch negative, where they were placed July 16, 2008; -- placed 23 ratings on CreditWatch negative; -- kept one rating on CreditWatch negative; and -- affirmed one rating. The affected tranches have an issuance amount of approximately $2.28 billion. CFO transactions are securitizations of equity shares issued by vehicles that invest in several hedge funds following predefined investment and diversification guidelines (often referred to as "funds of funds"). According to S&P: "The CreditWatch placements are based on our belief that the current increased volatility and downward pricing pressure in the overall market, the increase in return correlation among different hedge fund strategies, and the reduced liquidity available to hedge fund investors will continue in the short to medium term. In addition, we believe the problems surrounding the Bernard L. Madoff Investment Securities case and the related investment vehicles (Madoff) may contribute to an increase in hedge fund redemptions as investors seek to rebalance their portfolios and/or increase their portfolio quality by purchasing less-risky assets. As Standard & Poor's has recently observed, when hedge fund redemptions are high, managers sometimes suspend redemptions in the hope of minimizing losses and protecting remaining investors, and/or seek to retain the value of the assets they manage in order to continue collecting fees. "A small number of CFOs that we rate have direct exposure to Madoff and several additional CFOs may have indirect Madoff exposure, which could lower their reported net asset values. "In addition, four of the affected CFOs have breached a specific overcollateralization test and we expect them to redeem all of their underlying investments to repay the liabilities in sequential order. The extent to which the rated classes of notes receive full principal and accrued but unpaid interest will depend on the amount of cash proceeds ultimately received from the redemption process. "We will continue to monitor our rated CFO transactions and will take rating actions when appropriate. In addition, we will continue to review our current criteria assumptions related to volatility and lack of liquidity." RATINGS LOWERED AND PLACED ON CREDITWATCH NEGATIVE Antarctica CFO I Ltd. Rating Original par Transaction To From amount (mil.) ----------- -- ---- ------------- Class B A/Watch Neg AA EUR29.25 Class C BB/Watch Neg A EUR29.25 Man Glenwood Alternative Strategies II Ltd. Rating Original par Transaction To From amount (mil.) ----------- -- ---- ------------- Class D BBB-/Watch Neg BBB US$43.75 RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Antarctica CFO I Ltd. Rating Original par Transaction To From amount (mil.) ----------- -- ---- ------------- Class D CCC BBB/Watch Neg EUR26.00 Rating Original par Transaction To From amount (mil.) ----------- -- ---- ------------- Class E CCC- BB/Watch Neg EUR4.42 RATINGS PLACED ON CREDITWATCH NEGATIVE Rating Original par Transaction To From amount (mil.) ----------- -- ---- ------------- Antarctica CFO I Ltd. Class A AA/Watch Neg AA EUR175.50 Coast CFO 2005-1 Ltd. Class A AA/Watch Neg AA US$375.00 Class B AA/Watch Neg AA US$60.00 Class C A/Watch Neg A US$22.50 Class D BBB/Watch Neg BBB US$67.50 Coast CFO 2006-1 Ltd. Class A AA/Watch Neg AA US$300.00 Class B AA/Watch Neg AA US$46.00 Class C A/Watch Neg A US$20.00 Class D BBB/Watch Neg BBB US$54.00 Coast CFO 2006-2 Ltd. Class A AA/Watch Neg AA US$250.00 Class B AA/Watch Neg AA US$40.00 Class C A/Watch Neg A US$15.00 Class D BBB/Watch Neg BBB US$45.00 RMF Four Seasons CFO Ltd. Class S AA/Watch Neg AA EUR23.50 Class M1 AA/Watch Neg AA EUR18.80 Class M2 BBB/Watch Neg BBB EUR11.75 Class M3 B+/Watch Neg B+ EUR16.45 Zoo HF 3 PLC Class A AA/Watch Neg AA EUR94.50 Class B AA/Watch Neg AA EUR8.00 Class C A/Watch Neg A EUR6.50 Man Glenwood Alternative Strategies II Ltd. Class A AA/Watch Neg AA US$250.00 Class B AA/Watch Neg AA US$40.00 Class C A/Watch Neg A US$15.00 RATING REMAINING ON CREDITWATCH NEGATIVE Rating Original par Transaction To From amount (mil.) ----------- -- ---- ------------- Zoo HF 3 PLC Class D B-/Watch Neg B-/Watch Neg EUR12.50 RATING AFFIRMED Original par Transaction Rating amount (mil.) ----------- ------ ------------ Zoo HF 3 PLC Class E CCC- EUR5.50 * S&P Lowers Ratings on 18 Classes From 6 U.S. RMBS Transactions ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 18 classes from six U.S. subprime residential mortgage-backed securities (RMBS) transactions issued in 2006 and 2007. "In addition, we affirmed our ratings on 52 classes from the same transactions," S&P said. According to S&P: "The downgrades reflect our opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings, given our current projected losses. As announced in "S&P Revises Deal-Specific Projected Losses For U.S. Subprime RMBS Issued In 2006, 2007," published Aug. 19, 2008, on RatingsDirect, our default curve for U.S. subprime RMBS is a key component of our loss projection analysis of U.S. RMBS transactions, which is discussed in "Standard & Poor's Revised Default And Loss Curves For U.S. Subprime RMBS," published Oct. 19, 2007, on RatingsDirect. With the continued deterioration in U.S. RMBS performance, however, we are adjusting our loss curve forecasting methodology to more explicitly incorporate each transaction's current delinquency (including 60- and 90-day delinquencies), default, and loss trends. Some transactions are experiencing foreclosures and delinquencies at rates greater than our initial projections. We believe that adjusting our projected losses, which we derived from our default curve analysis, is appropriate in cases when the amount of current delinquencies indicates a different timing or level of loss. "To assess the creditworthiness of each class, we reviewed the individual delinquency and loss trends of each transaction for changes, if any, in risk characteristics, servicing, and the ability to withstand additional credit deterioration. For mortgage pools that are continuing to show increasing delinquencies, we increased our cash flow stresses to account for potential increases in monthly losses. In order to maintain a rating higher than 'B', a class had to absorb losses in excess of the base-case loss assumptions we assumed in our analysis. For example, a class may have to withstand 115% of our base-case loss assumptions in order to maintain a 'BB' rating, while a different class may have to withstand 125% of our base-case loss assumptions to maintain a 'BBB' rating. Each class that has an affirmed 'AAA' rating can withstand approximately 150% of our base-case loss assumptions under our analysis, subject to individual caps assumed on specific transactions. We determined the caps by limiting the amount of remaining defaults to 90% of the current pool balances. "A combination of subordination, excess spread, and overcollateralization provide credit support for the affected transactions. The underlying collateral for these deals consists of fixed- and adjustable-rate U.S. subprime mortgage loans that are secured by first and second liens on one- to four-family residential properties." RATING ACTIONS FFMLT Trust 2006-FF13 Series 2006-FF13 Rating Class CUSIP To From ----- ----- -- ---- A-2C 30247DAD3 BB+ A B-2 30247DAV3 D CC First Franklin Mortgage Loan Trust 2006-FF7 Series 2006-FF7 Rating Class CUSIP To From ----- ----- -- ---- I-A 320277AB2 BBB AA II-A-4 320277AF3 BBB AA II-A-3 320277AE6 BBB AAA First NLC Trust 2007-1 Series 2007-1 Rating Class CUSIP To From ----- ----- -- ---- A-2 32115BAB6 AA AAA A-3 32115BAC4 A AAA A-4 32115BAD2 A AAA M-1 32115BAE0 BBB AA+ M-2 32115BAF7 B A M-3 32115BAG5 B BBB HSI Asset Securitization Corporation Trust 2006-HE1 Series 2006-HE1 Rating Class CUSIP To From ----- ----- -- ---- II-A-1 44328AAB6 AA AAA II-A-2 44328AAC4 BB AA HSI Asset Securitization Corporation Trust 2007-HE2 Series 2007-HE2 Rating Class CUSIP To From ----- ----- -- ---- M-8 40430RAN6 CC CCC NovaStar Mortgage Funding Trust, Series 2007-2 Series 2007-2 Rating Class CUSIP To From ----- ----- -- ---- A-1A 66989EAA3 BB BBB A-2B 66989EAC9 AA AAA A-2C 66989EAD7 BBB A+ A-2D 66989EAE5 BB BBB RATINGS AFFIRMED FFMLT Trust 2006-FF13 Series 2006-FF13 Class CUSIP Rating ----- ----- ------ A1 30247DAA9 BB A-2A 30247DAB7 AAA A-2B 30247DAC5 AAA A-2D 30247DAE1 BB M-1 30247DAF8 B M-2 30247DAG6 CCC M-3 30247DAH4 CCC M-4 30247DAJ0 CCC M-5 30247DAK7 CCC First Franklin Mortgage Loan Trust 2006-FF7 Series 2006-FF7 Class CUSIP Rating ----- ----- ------ II-A-2 320277AD8 AAA M-1 320277AG1 BB M-2 320277AH9 B M-3 320277AJ5 CCC M-4 320277AK2 CCC M-5 320277AL0 CCC First NLC Trust 2007-1 Series 2007-1 Class CUSIP Rating ----- ----- ------ A-1 32115BAA8 AAA M-4 32115BAH3 CCC M-5 32115BAJ9 CCC M-6 32115BAK6 CCC M-7 32115BAL4 CCC M-8 32115BAM2 CCC M-9 32115BAN0 CCC HSI Asset Securitization Corporation Trust 2006-HE1 Series 2006-HE1 Class CUSIP Rating ----- ----- ------ I-A 44328AAA8 B II-A-3 44328AAD2 B II-A-4 44328AAE0 B II-A-5 44328AAF7 B M1 44328AAG5 CCC M2 44328AAH3 CCC M3 44328AAJ9 CCC HSI Asset Securitization Corporation Trust 2007-HE2 Series 2007-HE2 Class CUSIP Rating ----- ----- ------ I-A 40430RAA4 BB II-A-1 40430RAB2 AAA II-A-2 40430RAC0 AA II-A-3 40430RAD8 BB II-A-4 40430RAE6 BB M-1 40430RAF3 B M-2 40430RAG1 CCC M-3 40430RAH9 CCC M-4 40430RAJ5 CCC M-5 40430RAK2 CCC M-6 40430RAL0 CCC M-7 40430RAM8 CCC NovaStar Mortgage Funding Trust, Series 2007-2 Series 2007-2 Class CUSIP Rating ----- ----- ------ A-2A 66989EAB1 AAA M-1 66989EAF2 B M-2 66989EAG0 CCC M-3 66989EAH8 CCC M-4 66989EAJ4 CCC M-5 66989EAK1 CCC M-6 66989EAL9 CCC M-7 66989EAM7 CCC M-8 66989EAN5 CCC M-9 66989EAP0 CCC M-10 66989EAQ8 CCC * S&P Lowers Ratings on 34 Classes From 5 RMBS Transactions ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 34 classes from five residential mortgage-backed securities (RMBS) transactions backed by U.S. Alternative-A (Alt-A) mortgage loan collateral. "In addition, we affirmed our ratings on 60 classes from these series," S&P said. "The downgrades reflect our opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings given our current projected losses. Our loss assumptions for each of these transactions are: Transactions name Orig. bal. Proj. (mil. $) loss (%) ----------------- ---------- -------- IndyMac INDX Mtg Loan Trust 2006-AR2 1,750.6 16.88 Morgan Stanley Mtg Ln Tr 2007-7AX 1,118.4 19.21 Morgan Stanley Mtg Ln Tr 2006-13ARX 603.1 18.91 RALI Series 2004-QS8 271.0 0.65 JPMorgan Alternative Ln Tr 2005-S1 1,280.2 3.48 "We arrived at our estimated projected losses for the Alt-A RMBS deals using the analysis outlined in "Standard & Poor's Revised Default And Loss Curves For U.S. Alt-A RMBS Transactions," published Dec. 19, 2007, on RatingsDirect. The revised loss assumptions used in this review also include our loss severity assumptions, which we outlined in "Criteria: Standard & Poor's Revises U.S. Subprime, Prime, And Alternative-A RMBS Loss Assumptions," published July 30, 2008, on RatingsDirect. "As part of our analysis, we considered the characteristics of the underlying mortgage collateral as well as macroeconomic influences. For example, the risk profile of the underlying mortgage pools influences our default projections, while our outlook for housing price declines and the health of the housing market influences our loss severity assumptions. "To assess the creditworthiness of each class, we reviewed the individual delinquency and loss trends of each transaction for changes, if any, in risk characteristics, servicing, and the expected ability to withstand additional credit deterioration. In order to maintain a rating higher than 'B', a class had to absorb losses in excess of the base-case assumptions we assumed in our analysis. For example, one class may have to withstand approximately 115% of our base-case loss assumptions in order to maintain a 'BB' rating, while a different class may have to withstand approximately 125% of our base-case loss assumptions to maintain a 'BBB' rating. A class with an affirmed 'AAA' rating can likely withstand approximately 150% of our base-case loss assumptions under our analysis, subject to individual caps and qualitative factors assumed on specific transactions. "We also took into account the pay structure of each transaction and only stressed each class with losses that would occur while it remained outstanding. Additionally, we only gave excess interest credit for the amount of time the class would be outstanding. For example, if we projected a class to pay down in 15 months, then we applied only 15 months of losses to that class. Additionally, in such a case we assumed 15 months of excess spread if the class was structured with excess spread as credit enhancement." RATING ACTIONS IndyMac INDX Mortgage Loan Trust 2006-AR2 Series 2006-AR2 Rating Class CUSIP To From ----- ----- -- ---- 1-A-2 45661EAC8 B AAA 1-A-3A 45661EAD6 B- AA 1-A-3B 45661EAE4 A AA 2-A-1 45661EAF1 BB AAA 2-A-2 45661EAG9 A AA M-1 45661EAH7 CCC BB M-2 45661EAJ3 CCC B M-5 45661EAM6 CC CCC M-6 45661EAN4 CC CCC M-7 45661EAP9 CC CCC JPMorgan Alternative Loan Trust 2005-S1 Series 2005-S1 Rating Class CUSIP To From ----- ----- -- ---- B-1 46627MBH9 B AA B-2 46627MBJ5 CCC A B-3 46627MBK2 CC BBB B-4 46627MBM8 CC B B-5 46627MBN6 D CCC Morgan Stanley Mortgage Loan Trust 2006-13ARX Series 2006-13ARX Rating Class CUSIP To From ----- ----- -- ---- A-2 61750PAB4 B BBB A-3 61750PAC2 B BBB A-4 61750PAD0 CCC B M-1 61750PAE8 CC CCC M-2 61750PAF5 CC CCC M-5 61750PAJ7 D CC M-6 61750PAK4 D CC B-1 61750PAL2 D CC B-2 61750PAM0 D CC B-3 61750PAN8 D CC Morgan Stanley Mortgage Loan Trust 2007-7AX Series 2007-7AX Rating Class CUSIP To From ----- ----- -- ---- M-2 61754HAJ1 CC CCC M-3 61754HAK8 CC CCC M-4 61754HAL6 CC CCC M-5 61754HAM4 CC CCC B-1 61754HAP7 D CC B-2 61754HAQ5 D CC B-3 61754HAR3 D CC RALI Series 2004-QS8 Trust Series 2004-QS8 Rating Class CUSIP To From ----- ----- -- ---- B-1 76110HVE6 B BB B-2 76110HVF3 D B RATINGS AFFIRMED IndyMac INDX Mortgage Loan Trust 2006-AR2 Series 2006-AR2 Class CUSIP Rating ----- ----- ------ 1-A-1A 45661EAA2 AAA 1-A-1B 45661EAB0 AAA M-3 45661EAK0 CCC M-4 45661EAL8 CCC JPMorgan Alternative Loan Trust 2005-S1 Series 2005-S1 Class CUSIP Rating ----- ----- ------ 1-A-1 46627MAA5 AAA 1-A-2 46627MAB3 AAA 1-A-3 46627MAC1 AAA 1-A-4 46627MAD9 AAA 1-A-5 46627MAE7 AAA 1-A-6 46627MAF4 AAA 1-A-7 46627MAG2 AAA 1-A-8 46627MAH0 AAA 1-A-9 46627MAJ6 AAA 1-A-10 46627MAK3 AAA 2-A-1 46627MAL1 AAA 2-A-2 46627MAM9 AAA 2-A-3 46627MAN7 AAA 2-A-4 46627MAP2 AAA 2-A-5 46627MAQ0 AAA 2-A-6 46627MAR8 AAA 2-A-7 46627MAS6 AAA 2-A-8 46627MAT4 AAA 2-A-9 46627MAU1 AAA 2-A-10 46627MAV9 AAA 2-A-11 46627MAW7 AAA 2-A-12 46627MAX5 AAA 2-A-13 46627MAY3 AAA 2-A-14 46627MAZ0 AAA 2-A-15 46627MBA4 AAA 2-A-16 46627MBB2 AAA 2-A-17 46627MBC0 AAA 2-A-18 46627MBD8 AAA A-X 46627MBE6 AAA A-P 46627MBF3 AAA 3-A-1 46627MBG1 AAA Morgan Stanley Mortgage Loan Trust 2006-13ARX Series 2006-13ARX Class CUSIP Rating ----- ----- ------ A-1 61750PAA6 AAA Morgan Stanley Mortgage Loan Trust 2007-7AX Series 2007-7AX Class CUSIP Rating ----- ----- ------ 1-A 61754HAA0 B 2-A-1 61754HAB8 BB 2-A-2 61754HAC6 BB 2-A-3 61754HAD4 BB 2-A-4 61754HAE2 B 2-A-5 61754HAF9 A 2-A-6 61754HAG7 B M-1 61754HAH5 CCC RALI Series 2004-QS8 Trust Series 2004-QS8 Class CUSIP Rating ----- ----- ------ A-1 76110HUK3 AAA A-2 76110HUL1 AAA A-3 76110HUM9 AAA A-4 76110HUN7 AAA A-5 76110HUP2 AAA A-6 76110HUQ0 AAA A-7 76110HUR8 AAA A-9 76110HUT4 AAA A-10 76110HUU1 AAA A-11 76110HUV9 AAA A-12 76110HUW7 AAA A-P 76110HUX5 AAA A-V 76110HUY3 AAA M-1 76110HVB2 AA M-2 76110HVC0 A M-3 76110HVD8 BBB * Chapter 11 Cases With Assets & Liabilities Below $1,000,000 ------------------------------------------------------------- In Re Stewart, Thomas E. Bankr. D. Ariz. Case No. 08-17325 Chapter 11 Petition Filed December 1, 2008 Filed as Pro Se In Re Sparta Family, Limited Partnership Bankr. D. Ariz. Case No. 08-17362 Chapter 11 Petition Filed December 2, 2008 See http://bankrupt.com/misc/azb08-17362.pdf In Re Nutrition Distribution LLC Bankr. D. Ariz. Case No. 08-17559 Chapter 11 Petition Filed December 4, 2008 See http://bankrupt.com/misc/azb08-17559.pdf In Re Cabinets Plus, Inc. Bankr. D. Ariz. Case No. 08-17581 Chapter 11 Petition Filed December 5, 2008 See http://bankrupt.com/misc/azb08-17581.pdf In Re Hawes, Ricky R. Bankr. W.D. Ark. Case No. 08-75009 Chapter 11 Petition Filed December 5, 2008 See http://bankrupt.com/misc/akwb08-75009.pdf In Re R & S Auto & Truck Repair, Inc. Bankr. M.D. Pa. Case No. 08-53450 Chapter 11 Petition Filed December 5, 2008 See http://bankrupt.com/misc/pamb08-53450.pdf In Re Servicios Medicos De Anasco, Inc. Bankr. D. P.R. Case No. 08-08300 Chapter 11 Petition Filed December 5, 2008 See http://bankrupt.com/misc/prb08-08300.pdf In Re Saville, Mark Stanley Bankr. D. S.C. Case No. 08-07873 Chapter 11 Petition Filed December 5, 2008 See http://bankrupt.com/misc/scb08-07873.pdf In Re The Bagel Bakery, LLC The Bagel Cafe Bankr. D. Ariz. Case No. 08-17694 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/azb08-17694.pdf In Re Drivers Seat Automotive Inc. Bankr. N.D. Ga. Case No. 08-85220 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/ganb08-85220.pdf In Re Cox Ventures, LLC Bankr. W.D. La. Case No. 08-81418 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/lawb08-81418.pdf In Re Carr, Leon Henry III Bankr. D. Md. Case No. 08-26238 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/mdb08-26238.pdf In Re Bayside Electrical Contractors, Inc. Bankr. D. Mass. Case No. 08-19379 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/mab08-19379.pdf In Re Robertsons Chevrolet, Inc. Bankr. D. Mass. Case No. 08-19377 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/mab08-19377.pdf In Re Bilda Development, LLC aka Lake Michigan Home Builder Bankr. W.D. Mich. Case No. 08-10923 Chapter 11 Petition Filed December 8, 2008 Filed as Pro Se In Re Ronald W. Katz D.M.D., P.A. Bankr. D. N.C. Case No. 08-08781 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/nceb08-08781.pdf In Re 4CorporateGolf, Inc. dba Genesis Creative Advertising & Development Bankr. E.D. Pa. Case No. 08-18077 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/paeb08-18077.pdf In Re El Legado de Chi Chi Rodriguez Golf Resort (S.C.) S.E. Bankr. D. P.R. Case No. 08-08321 Chapter 11 Petition Filed December 8, 2008 Filed as Pro Se In Re Laster, Dwayne aka Jerry Dwayne Laster aka Jerry Laster dba Tobacca Place III Bankr. W.D. Tenn. Case No. 08-14823 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/tnwb08-14823.pdf In Re Lee, Robert J. Lee, Monique M. aka Monique McCarter Lee Bankr. E.D. Va. Case No. 08-74183 Chapter 11 Petition Filed December 8, 2008 See http://bankrupt.com/misc/vaeb08-74183.pdf In Re Good Shepherd LLC Bankr. D. Ariz. Case No. 08-17784 Chapter 11 Petition Filed December 9, 2008 Filed as Pro Se In Re Krull, Kerry Noel Bankr. C.D. Calif. Case No. 08-31278 Chapter 11 Petition Filed December 9, 2008 See http://bankrupt.com/misc/cacb08-31278.pdf In Re McBeth, Sandra K. aka Reynolds Bankr. C.D. Calif. Case No. 08-31407 Chapter 11 Petition Filed December 9, 2008 Filed as Pro Se In Re The Olympian on Grand, LLC Bankr. C.D. Calif. Case No. 08-31345 Chapter 11 Petition Filed December 9, 2008 Filed as Pro Se In Re Yubane, Michael K. Bankr. S.D. Calif. Case No. 08-12575 Chapter 11 Petition Filed December 9, 2008 Filed as Pro Se In Re LRC Aviation, LLC Bankr. M.D. Fla. Case No. 08-11675 Chapter 11 Petition Filed December 9, 2008 See http://bankrupt.com/misc/flmb08-11675.pdf In Re Avondate Commercial Holdings, LLC Bankr. D. Ariz. Case No. 08-17862 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/azb08-17862.pdf In Re Jones, John. D. Jones, Loretta Lee Bankr. D. Ariz. Case No. 08-17854 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/azb08-17854.pdf In Re Wickline, Troy Milo Wickline, Margaret Ellen Bankr. E.D. Calif. Case No. 08-38211 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/caeb08-38211.pdf In Re Bradley, Sharon Denise aka Bradley, Denise Bankr. N.D. Calif. Case No. 08-47320 Chapter 11 Petition Filed December 10, 2008 Filed as Pro Se In Re Sardina, Michael J. II Bankr. N.D. Calif. Case No. 08-57153 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/canb08-57153.pdf In Re The Blue on Coral Way, L.L.C. Bankr. S.D. Fla. Case No. 08-28795 Chapter 11 Petition Filed December 10, 2008 Filed as Pro Se In Re Bone, Thomas Bone, Virginia C. Bankr. D. Md. Case No. 08-42781 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/mdb08-42781.pdf In Re R.R. Real Estate, Inc. Bankr. D. Md. Case No. 08-26390 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/mdb08-26390.pdf In Re Carroll, Kathleen M. Bankr. E.D. Mich. Case No. 08-70182 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/mieb08-70182.pdf In Re Atlantic City Surplus, LLC Bankr. D. N.J. Case No. 08-34550 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/njb08-34550p.pdf See http://bankrupt.com/misc/njb08-34550c.pdf In Re Buffets of Autobaum, Inc. aka Golden Corral Audubon Bankr. D. N.J. Case No. 08-34565 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/njb08-34565.pdf In Re Buffets of Bensalem, LLC aka Lake Michigan Home Builder Bankr. D. N.J. Case No. 08-34568 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/njb08-34568.pdf In Re Buffets of Pennsylvania, Inc. Bankr. D. N.J. Case No. 08-34570 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/njb08-34570.pdf In Re Buffets of Seaford, LLC Bankr. D. N.J. Case No. 08-34572 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/njb08-34572.pdf In Re Europa Business Machines, Inc. Bankr. D. N.J. Case No. 08-34499 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/njb08-34499.pdf In Re Janets, Inc. aka Golden Coral Dover Bankr. D. N.J. Case No. 08-34573 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/njb08-34573.pdf In Re Stiletto, Inc. Bankr. E.D. Pa. Case No. 08-18125 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/mieb08-18125.pdf In Re P and E Enterprises, Inc. Bankr. M.D. Tenn. Case No. 08-11649 Chapter 11 Petition Filed December 10, 2008 See http://bankrupt.com/misc/tnmb08-11649.pdf In Re Forest Oaks, LLC Bankr. S.D. Ala. Case No. 08-14955 Chapter 11 Petition Filed December 11, 2008 See http://bankrupt.com/misc/alsb08-14955.pdf In Re Myron, Stephen R. Bankr. N.D. Ind. Case No. 08-14268 Chapter 11 Petition Filed December 11, 2008 See http://bankrupt.com/misc/innb08-14268.pdf In Re Realchek, LLC Bankr. E.D. Mich. Case No. 08-35184 Chapter 11 Petition Filed December 11, 2008 See http://bankrupt.com/misc/mieb08-35184p.pdf See http://bankrupt.com/misc/mieb08-35184c.pdf In Re Goodson, Raymond L. Bankr. E.D. N.C. Case No. 08-08925 Chapter 11 Petition Filed December 11, 2008 See http://bankrupt.com/misc/nceb08-08925p.pdf See http://bankrupt.com/misc/nceb08-08925c.pdf In Re Weber, Christopher M. dba Ohio Computer Recycling, LLC Bankr. S.D. Ohio Case No. 08-62140 Chapter 11 Petition Filed December 11, 2008 See http://bankrupt.com/misc/ohsb08-62140.pdf In Re CEAD, Inc. Bankr. M.D. Pa. Case No. 08-04622 Chapter 11 Petition Filed December 11, 2008 Filed as Pro Se In Re Bison Tire and Service, Inc. Bankr. W.D. Pa. Case No. 08-12276 Chapter 11 Petition Filed December 11, 2008 See http://bankrupt.com/misc/pawb08-12276p.pdf See http://bankrupt.com/misc/pawb08-12276c.pdf In Re Industrial Rubber Products, Inc. Bankr. S.D. Tex. Case No. 08-37912 Chapter 11 Petition Filed December 11, 2008 See http://bankrupt.com/misc/txsb08-37912.pdf In Re Four Seasons Auto Repair Service Centers, Inc. Bankr. W.D. Wash. Case No. 08-46542 Chapter 11 Petition Filed December 11, 2008 See http://bankrupt.com/misc/wawb08-46542.pdf In Re Fellowship Properties, Inc. Bankr. E.D. Ark. Case No. 08-17768 Chapter 11 Petition Filed December 12, 2008 Filed as Pro Se In Re J L Construction Group, LLC Bankr. M.D. La. Case No. 08-11691 Chapter 11 Petition Filed December 12, 2008 See http://bankrupt.com/misc/lamb08-11691p.pdf See http://bankrupt.com/misc/lamb08-11691c.pdf In Re The Commercial Group, L.L.C. Bankr. D. Md. Case No. 08-26495 Chapter 11 Petition Filed December 12, 2008 Filed as Pro Se In Re Lawrence Meat Company, Inc. Bankr. D. Mass. Case No. 08-44056 Chapter 11 Petition Filed December 12, 2008 See http://bankrupt.com/misc/mab08-44056.pdf In Re Jones, Jasper Henry Jones, Renette Rae Bankr. D. N.M. Case No. 08-14254 Chapter 11 Petition Filed December 14, 2008 See http://bankrupt.com/misc/nmb08-14254.pdf In Re Dunham, Mary Ruth Bankr. D. Ore. Case No. 08-36901 Chapter 11 Petition Filed December 12, 2008 Filed as Pro Se In Re Community Youth Center, Inc. Bankr. E.D. Va. Case No. 08-36349 Chapter 11 Petition Filed December 12, 2008 See http://bankrupt.com/misc/vaeb08-36349.pdf In Re Elite Logistics West, LLC Bankr. C.D. Calif. Case No. 08-27819 Chapter 11 Petition Filed December 13, 2008 See http://bankrupt.com/misc/cacb08-27819.pdf In Re Royal European Motors, a Fla. corp. Bankr. S.D. Fla. Case No. 08-29076 Chapter 11 Petition Filed December 14, 2008 See http://bankrupt.com/misc/flsb08-29076.pdf ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Luke Caballos, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2008. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***